<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K
____ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1995
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-483
_______________________
MALLINCKRODT GROUP INC.
(Exact name of Registrant as specified in its charter)
New York 36-1263901
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
7733 Forsyth Boulevard
St. Louis, Missouri
(Address of principal 63105-1820
executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-854-5200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
4% Cumulative Preferred Stock,
par value $100 per share New York Stock Exchange
Common Stock, par value $1 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
9 7/8% Sinking Fund Debentures
due March 15, 2011 New York Stock Exchange
6% Notes due October 15, 2003 New York Stock Exchange
7% Debentures due December 15, 2013 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
_______________________
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. ___
______________________
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant: $2,884,846,713 as of August 31,
1995. Market value is based on the August 31, 1995, closing prices of
Registrant's Common Stock and 4% Cumulative Preferred Stock.
Applicable Only To Corporate Registrants: Indicate the number of
shares outstanding of each of the Registrant's classes of common
stock: 76,532,542 shares as of August 31, 1995.
Documents Incorporated By Reference: Information required by Items
10, 11, 12, and 13 of Part III is incorporated by reference from
pages 1 through 4, pages 6 through 19, pages 8 and 9, and pages 7, 9
and 10, respectively, of the Registrant's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on October 18, 1995.
<PAGE>
1995 FORM 10-K CONTENTS
Item Page
---- ----
Part I:
1. Business............................................1
Introduction........................................1
General Factors Related To Business Segments........2
International Operations............................2
Mallinckrodt Chemical...............................3
Mallinckrodt Medical................................5
Mallinckrodt Veterinary.............................9
Other Activities...................................11
2. Properties.........................................13
3. Legal Proceedings..................................13
4. Submission of Matters to a Vote of Security
Holders.........................................15
Executive Officers of the Registrant...............15
Part II:
5. Market for the Registrant's Common Stock and
Related Stockholder Matters......................16
6. Selected Financial Data............................17
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............18
8. Financial Statements and Supplementary Data........24
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..............46
Part III:
10. Directors and Executive Officers of the
Registrant.......................................46
11. Executive Compensation.............................46
12. Security Ownership of Certain Beneficial Owners
and Management...................................46
13. Certain Relationships and Related Transactions.....46
Part IV:
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K..............................46
Signatures..............................................53
<PAGE>
PART I.
ITEM 1. BUSINESS
INTRODUCTION
Company Profile
---------------
Mallinckrodt Group Inc. (Mallinckrodt, the Company, or the
Corporation) provides human and animal health care products and
specialty chemicals worldwide by means of its three technology-based
operating subsidiaries: Mallinckrodt Chemical, Mallinckrodt Medical
and Mallinckrodt Veterinary.
The Company was incorporated in New York in 1909 under the name
International Agricultural Corporation. The corporate headquarters is
located at 7733 Forsyth Boulevard, St. Louis, Missouri 63105-1820, and
the telephone number is (314) 854-5200.
Transition of the Company
-------------------------
During the past several years, the Company has taken significant steps
to develop its current composition of businesses as follows:
- In February 1986, the Company, then called International
Minerals & Chemical Corporation, purchased Mallinckrodt, Inc.
for $675 million in cash.
- In October 1986, the Company sold its gas and oil segment and
its industrial products segment for $162 million.
- From March 1987 through July 1989, the Company expanded its
animal health business by acquiring Pitman-Moore, Inc., Coopers
Animal Health and the animal health business of Glaxo Holdings
for an aggregate $266 million in cash plus the assumption of
certain liabilities.
- In February 1988, IMC Global, Inc. then called IMC Fertilizer
Group, Inc. (IFL), then a wholly owned subsidiary, completed an
initial public offering (IPO) of shares of common stock. Until
March of 1991, the Company owned 10 million shares of IFL common
stock, less than a majority voting interest in IFL, and
accounted for its investment in IFL by the equity method. In
September 1988, the Company's holdings of IFL's Preferred Stock,
Series A, were redeemed by IFL for $200 million.
- In June 1990, shareholders approved changing the Company's name
from International Minerals & Chemical Corporation to IMCERA
Group Inc.
- In March 1991, the Company entered into a sale and option
agreement with IFL under which IFL purchased, in three stages,
all 10 million shares of IFL common stock which the Company
owned for total net proceeds of $385 million. As of July 1991,
the Company no longer owned any IFL shares.
- In January 1992, Mallinckrodt, Inc., a wholly owned subsidiary
of IMCERA Group, Inc., divided its principal operations to form
two separate subsidiaries, Mallinckrodt Medical, Inc. and
Mallinckrodt Specialty Chemicals Company.
- In June 1993, the Company announced the details of a
restructuring program which resulted in a charge of $242 million
after taxes, most of which was for actions taken at Mallinckrodt
Veterinary (then called Pitman-Moore). Further discussion is
included in the Mallinckrodt Chemical and Mallinckrodt
Veterinary business segment discussions and Note 1 of Notes to
Consolidated Financial Statements (Notes).
- On March 15, 1994, shareholders approved changing the Company's
name from IMCERA Group Inc. to Mallinckrodt Group Inc.
Simultaneous with the corporate name change, Mallinckrodt
Specialty Chemicals changed its name to Mallinckrodt
Chemical, Inc. and Pitman-Moore changed its name to Mallinckrodt
Veterinary, Inc.
- In March 1994, the Company moved its headquarters from
Northbrook, Illinois to St. Louis, Missouri.
- In June 1994, the Company announced the details of a
restructuring program which resulted in a charge of $59 million
after taxes, most of which relates to Mallinckrodt Medical.
Further discussion is included in the Mallinckrodt Medical and
Mallinckrodt Veterinary business segment discussions and Note 1
of the Notes.
Other recent acquisitions, divestitures and continuing investments in
each of Mallinckrodt's businesses are described in the discussions of
the business segments, Management's Discussion and Analysis of
Financial Condition and Results of Operations in Item 7 on pages 18-
23, and Note 1 of the Notes.
General Points
--------------
In this report:
Mallinckrodt Group Inc. and its subsidiaries, collectively, are called
the "Company," the "Corporation," or "Mallinckrodt," unless otherwise
indicated by the context. The Company has three business segments:
Mallinckrodt Chemical, Mallinckrodt Medical and Mallinckrodt
Veterinary.
The term "operating earnings" of a business segment represents that
business segment's revenues, including sales to other Mallinckrodt
business segments, less all operating expenses. Operating expenses of
a business segment do not include interest expense, corporate income
or expense and taxes on income.
All references to years are to fiscal years ended June 30 unless
otherwise stated.
Registered trademarks are indicated by an asterisk (*).
General Factors Related to Business Segments
--------------------------------------------
Numerous health care reform proposals have been introduced in the U.S.
Congress, and various states have also introduced or enacted such
reform measures. Mallinckrodt is unable to predict what effect any
such legislation might have on its businesses.
None of Mallinckrodt's business segments are dependent upon any single
customer or supplier or group of related or affiliated customers or
suppliers whose loss would have a material effect on its sales and
operating results. Raw materials for the Feed Ingredients business
discussed on page 11 are virtually all served by a single vendor.
In general, Mallinckrodt's business segments, including related
working capital requirements, are not materially affected by seasonal
factors.
Mallinckrodt's business segments do not extend long-term credit to
customers. The Company believes this non-extension of credit as well
as its working capital requirements are not materially different from
the credit policies and working capital requirements of its
competitors.
Competition with manufacturers and suppliers in Mallinckrodt's
business segments involves price, service, quality and technological
innovation. Competition is strong in all markets served.
Financial information about industry segments is included in Note 18
of the Notes. Financial information about foreign and domestic
operations is included in Note 17 of the Notes.
International Operations
Foreign operations and investments are subject to risks customarily
encountered in such operations and investments. Risks include
fluctuations in currency exchange rates and controls, expropriation
and other economic, political and regulatory policies of local
governments, as well as laws and policies of the United States
affecting foreign trade and investment.
Mallinckrodt sales outside the U.S. represented about 37 percent of
consolidated net sales in 1995, 1994 and 1993. Products are
manufactured and marketed through a variety of subsidiaries,
affiliates and joint ventures around the world. See discussions of
individual business segments included below; under Item 7,
Management's Discussion and Analysis of Financial Condition and
Results of Operations; and in Note 17 of the Notes for
additional information.
Mallinckrodt Chemical
---------------------
Mallinckrodt Chemical sales were:
Years ended June 30,
--------------------
1995 1994 1993
---- ---- ----
(in millions)
Net sales
Catalysts, Performance & Lab Chemicals........$318 $212 $183
Pharmaceutical Specialties.................... 259 225 212
---- ---- ----
$577 $437 $395
==== ==== ====
Mallinckrodt Chemical, Inc. and its subsidiaries, collectively are
called "Chemical," unless otherwise indicated by the context.
Chemical's products are sold to a variety of markets. These products
possess a higher degree of technology and service than is
characteristic of commodity chemicals. Generally, Chemical's products
are sold as chemical intermediates which are used by customers
worldwide as components, ingredients or reagents, rather than as final
consumer products. Many of Chemical's products are processed in
multi-purpose manufacturing facilities. These products are also often
subject to government regulation and industry standards, including
FDA-mandated "Good Manufacturing Practice."
Chemical's products include catalysts, high-purity performance
chemicals, laboratory chemicals, drug chemicals and peptides. Through
its 50 percent interest in the Tastemaker joint venture, the company
also participates in the flavors business.
The restructuring program begun in 1993 is producing anticipated
results and was substantially completed in 1995, with the exit of the
photochemicals business, including the divestiture of the Dieburg,
Germany photochemical manufacturing facility.
Catalysts, Performance & Lab Chemicals
--------------------------------------
Catalysts are sold to the petrochemical and food industries. They
include such products as platinum and palladium on carbon or alumina
substrates; copper chromite; tableted, flaked and droplet shapes of
nickel catalysts; and a variety of custom catalysts. Such catalysts
are used to manufacture plasticizers, detergents, rubber products,
insecticides, synthetic motor oil and edible fats and oils. Catalysts
are marketed directly by Chemical under the registered trademark
Calsicat*.
In 1995, TRIMET Technical Products, Inc., a small specialty chemical
business, was reclassified to continuing operations and merged with
Chemical. TRIMET, based in Allentown, Pennsylvania, manufactures
specialty additives to enhance the performance of water-based paints
and coatings. Its products are sold internationally through
Chemical's sales force and selected agents.
In 1994, Chemical acquired Catalyst Resources, Inc., a manufacturer of
polymerization catalysts based in Pasadena, Texas. Catalyst Resources
produces custom and proprietary catalysts for manufacturers of
polypropylene and polyethylene. Catalyst Resources products are
marketed by a direct sales force, with a large percentage of sales to
international customers.
High-purity performance chemicals sold to industrial and
pharmaceutical consumers include such products as calcium stearates
and other metal soaps for use as internal lubricants to facilitate the
manufacture of molded and extruded plastics; high performance monomers
and several plastic additives and customized additive blends for use
as processing aids in the production of polymers; potassium chloride
for use as a "salt substitute" in low-sodium diets; and other salts,
chemicals and reagents used in the production of pharmaceutical and
food products. Chemical sells these products through distributors and
its own sales force.
Laboratory chemical products include high-purity reagent chemicals
used in research and development and analytical laboratories. These
high-purity products consist of hundreds of reagent chemicals sold
through distributors and a direct sales force to medical, industrial,
educational and governmental laboratories.
In 1995, Chemical acquired J.T. Baker Inc., a worldwide manufacturer
and supplier of laboratory, process and microelectronic chemicals.
The acquisition brought an excellent brand name and a strong
organization, including international operations, to Chemical's
existing performance and laboratory chemicals business. To maximize
the synergies of the two businesses, Chemical has combined its
performance and laboratory chemicals business with J.T. Baker's and
renamed the subsidiary Mallinckrodt Baker, Inc. Former facilities and
sales offices from both organizations are now being operated under the
Mallinckrodt Baker name.
Catalysts, performance and laboratory chemicals are manufactured in
Allentown, Pennsylvania; Deventer, Netherlands; Erie, Pennsylvania;
Hayward, California; Mexico City, Mexico; Paris, Kentucky; Pasadena,
Texas; Phillipsburg, New Jersey; and St. Louis, Missouri.
Pharmaceutical Specialties
--------------------------
Pharmaceutical specialties products include analgesics such as
acetaminophen (APAP) used to control pain and fever; codeine salts and
other opium-based narcotics and synthetic narcotics used to treat pain
and coughs; and peptides which are used in many new pharmaceuticals.
Other pharmaceutical specialties products include narcotic/APAP
combination products; Toleron* brand of ferrous fumarate which
stimulates the formation of red blood cells; and Methadose* which is
used for opiate addiction therapy and analgesia.
Most pharmaceutical specialties products are sold to the
pharmaceutical industry for use in the manufacture of dosage-form
drugs. Narcotic prescription chemicals are also sold directly to drug
wholesalers, while opiate addiction products are primarily sold to
government clinics. In 1995, Chemical installed pharmaceutical
tableting lines, and plans to broaden its business to include more
dosage-form products in the near future. These products will be sold
to drug wholesalers, foreign governments and pharmaceutical companies.
All pharmaceutical specialties are marketed by a direct sales force.
The Company performed facility construction and modification of its
St. Louis, Missouri peptide facility in both 1994 and 1993. APAP
manufacturing and waste-treatment capacity at the Raleigh, North
Carolina facility has been expanded significantly in the past few
years, while costs have been reduced. The Derbyshire, England
para-aminophenol (PAP, a precursor of APAP) manufacturing plant has
also significantly increased its capacity.
In 1993, Chemical acquired Contech Laboratories, a facility located in
Greenville, Illinois, which had performed certain processing steps
relating to the manufacture of Compap* and other products. Chemical
has expanded this facility to manufacture and process additional
products and forms. Chemical is also working on a multi-year project
to expand and upgrade the narcotics facility in St. Louis, Missouri,
to meet growing worldwide demand.
Pharmaceutical specialties are manufactured in Derbyshire, England;
Greenville, Illinois; Raleigh, North Carolina; St. Louis, Missouri;
and Torrance, California.
Joint Venture
-------------
Tastemaker, headquartered in Cincinnati, Ohio, is a 50/50 joint
venture partnership with Hercules Incorporated. Tastemaker
manufactures and markets flavors products for use in the food and
beverage industry and pharmaceutical products. The Company has a
major presence in the world's three largest flavors markets - Europe,
North America and Asia/Pacific. Production and distribution of these
products are subject to regulation by various national agencies.
Tastemaker manufacturing facilities are located in Barneveld,
Netherlands; Cincinnati, Ohio; Lakeland, Florida; Mexico City, Mexico;
Milton Keynes, United Kingdom; and Sydney, Australia. New production
facilities are under construction in Japan, and more are planned for
the Far East in the next few years. Distribution is primarily
through direct sales forces and distributors.
Mallinckrodt Medical
--------------------
Mallinckrodt Medical sales were:
Years ended June 30,
--------------------
1995 1994 1993
(in millions)
Net sales
Imaging.......................................$ 688 $622 $564
Anesthesiology & Critical Care................ 324 290 219
------ ---- ----
$1,012 $912 $783
====== ==== ====
Mallinckrodt Medical, Inc. and its subsidiaries, collectively are
called "Medical," unless otherwise indicated by the context.
Medical products are instrumental in the delivery of health care
services and are sold to hospitals, clinical laboratories and other
customers on a worldwide basis. They are related by a high degree of
innovation and technology, by regulation from agencies such as the
U.S. Food and Drug Administration (FDA) and by markets served.
They are significantly affected by conditions within the health care
industry, including continuing legislative initiatives and public and
private health care insurance and reimbursement programs. An aging
population and demand for technologically superior products to improve
the quality of life while lowering the cost of care are two major
factors fueling growth within the industry.
Medical provides advanced, innovative products for radiology,
cardiology, nuclear medicine, anesthesiology and critical care.
Principal products of this industry segment are contrast media for
various imaging modalities, radiopharmaceuticals for medical
diagnostic procedures, disposable medical devices, and instruments and
systems for use in surgical procedures, critical care and alternate
site facilities.
During 1994, Medical conducted studies to develop strategies to
effectively respond to customer needs and compete in a market that is
changing rapidly as the result of health care reform. As a result of
these efforts, in the fourth quarter of 1994, Medical recorded a
pre-tax charge of $74 million related to the reengineering process.
The key components of the charge included the reorganization of the
medical specialty oriented U.S. sales structure into a unified
sales organization divided into geographical districts; reorganization
to reduce, centralize and standardize certain non-sales related
functions and management processes; relocation of the Argyle, New York
tracheal tube manufacturing operations to existing plants in
Athlone, Ireland and Irvine, California, and a new facility now being
constructed in Juarez, Mexico; and severance costs related to an
associated workforce reduction.
The process of restructuring the U.S. sales force addresses new
alliances being created on a market-by-market basis and the changing
dynamics of existing customers' decision-making processes. Medical has
consolidated its five divisional sales units into one team that
reports through a senior vice president to the chief executive
officer, thereby increasing responsiveness by reducing levels of
authority. The consolidation also creates 12 geographic regions to
improve planning and strategy development on a local basis. Emphasis
will continue to be contact with the clinical community within its
customer base; however, the new sales structure will create a single
point of contact with each purchasing entity, providing quicker, more
efficient and effective customer service.
Pre-tax cash related expenditures for this restructuring should
approximate $65 million, consisting of $28 million for severance costs
for about 500 people at various locations around the world, $15
million for consulting, $13 million for manufacturing rationalization
and $9 million for other items. Approximately $26 million of the cash
expenditures occurred through June 30, 1995, the majority of which
related to severance associated with a workforce reduction of
approximately 500 people and consulting costs. The majority of the
remaining cash expenditures of $39 million will be paid in 1996 and
relate to severance for terminated employees and consulting. Based on
expenditures to date and those anticipated by the original plan, no
significant adjustment to the reserve value is expected at this time.
The noncash pre-tax portion of the charge should approximate $9
million, primarily relating to asset value adjustments associated with
manufacturing rationalization. Annual pre-tax savings from the
restructuring will be approximately $40 million, with approximately
$11 million achieved in 1995 and the full amount to be achieved in
1996.
The restructuring should allow Medical to remain flexible to address
future change, reduce costs, remain competitive and sustain a strong
market presence.
Imaging
-------
Radiology products include iodinated contrast media (ionic and
nonionic) and catheters for use in studies of the brain, abdominal
organs, renal system, peripheral vascular system and other areas of
the body to aid in diagnosis and therapy. In 1995, these products were
marketed principally by a geographically organized sales force
pursuant to Medical's restructuring. Since its introduction in the
U.S. five years ago, Optiray*, a low osmolar, nonionic medium, has
been widely accepted in both radiology and cardiology indications.
Optiray* began to be introduced outside the U.S. in 1991. To source
growing Optiray* volumes in the international market, the company
opened a new production facility in Dublin, Ireland during 1994, for
the manufacture of Optiray* in its bulk drug form. In addition, a
capacity expansion at Medical's existing plant in St. Louis, Missouri
was completed in 1994. In June 1990, Medical introduced Ultraject*, a
patented innovation in contrast media agent administration. This
prefilled syringe provides radiologists a more efficient, convenient
and safer method of delivering contrast agents. Ultraject* continues
to fuel the growth of Optiray* in the imaging market as it provides a
significant market edge over traditional glass syringes because it
reduces handling hazards and the potential for dosage error.
The cardiology business is directed toward meeting the needs of both
invasive and non-invasive cardiology in diagnosing and treating
diseases of the heart and the cardiovascular system. The business
currently offers both ionic and nonionic contrast agents, and
interventional catheters and related supplies. These products
are sold directly to hospitals, primarily by a dedicated sales force
within Medical's geographically organized sales force. During 1989,
Medical acquired an equity position of less than two percent of the
then currently outstanding common shares of Molecular Biosystems, Inc.
of San Diego, California, and obtained exclusive marketing rights in
the Western Hemisphere for Albunex*, a new ultrasound contrast agent.
Albunex* was unanimously recommended for approval by the Radiology
Device Advisory Panel of the FDA in July 1992. Molecular Biosystems
received an approvable letter for Albunex* from the FDA in April 1994.
Final approval was received early in August 1994 with Medical's launch
of the product occurring in the second quarter of 1995. On September
7, 1995, Medical entered into a new distribution and investment
agreement for Albunex* and FS069, a major new ultrasound contrast
agent in development. The new agreement provides for Mallinckrodt
to make an additional equity investment in Molecular Biosystems, fund
FS069 clinical development and make various milestone payments. Total
equity position in Molecular Biosystems pursuant to this final
agreement will be approximately ten percent.
During 1995, Medical entered into a research and license agreement
with OPTIMEDx to develop optical imaging agents designed to aid in the
detection and localization of cancer cells in patients. Pursuant to
the agreement, Medical made an equity investment in exchange for
licensing rights and will make payments to OPTIMEDx for achieving
certain milestones in researching, developing, and obtaining
regulatory approval.
During 1993, Medical reached an agreement with Peripheral Systems
Group ("PSG"), a division of Eli Lilly and Company, to obtain
exclusive, worldwide distribution rights for a broad line of
interventional radiology and cardiology products manufactured by PSG.
The company started North American distribution in 1993 and began full
distribution in Europe, Japan and Latin America in the third quarter
of 1994.
Medical's largest developmental effort in the area of cardiology and
radiology is directed toward contrast agents for magnetic resonance
imaging, primarily in neurology, oncology and cardiovascular
applications.
The nuclear medicine business consists of radiopharmaceuticals used to
provide images of numerous body organs' anatomy and function, and to
diagnose and treat diseases. Nuclear medicine products are sold to
hospitals and clinics in the U.S. by both a direct geographically
organized sales force and through a nationwide network of nuclear
pharmacies. Internationally, nuclear medicine products are marketed
through direct sales forces and distributors. Health physics
consulting services are also provided to hospitals.
In 1995, Medical signed an agreement with Medi+Physics to distribute
Mallinckrodt Medical's proprietary radiopharmaceutical products
through Medi+Physics radiopharmacies in the U.S. and Canada.
Additionally, in 1995, Medical signed a license agreement with
Immunomedics for Mallinckrodt Medical to market CEA-Scan in
select European countries subject to receipt of regulatory approval in
those countries. CEA-Scan is an in vivo diagnostic imaging product
for colorectal cancer.
In June 1994, the FDA authorized U.S. marketing of OctreoScan*. This
unique radiopharmaceutical assists physicians in diagnosing and
determining the extent of spread in certain types of cancers, using a
non-invasive procedure instead of surgical biopsy. OctreoScan* is
manufactured at facilities in St. Louis, Missouri and Petten,
Netherlands. Introduction of the product began in June 1994 through
key hospitals specializing in cancer treatment. Marketing of the
product was expanded in 1995 upon FDA approval of promotional
material.
In 1992, Medical signed an agreement with the Netherlands Energy
Research Foundation to construct a plant in Petten, Netherlands
dedicated to the manufacture of molybdenum-99 (Mo99), a key raw
material used in the production of the nuclear medicine imaging
product technetium-99m. Full production is expected to begin by mid
1996.
In 1990, Medical introduced TechneScan* MAG3* for improved imaging of
the kidneys and the renal system. Unlike a standard X-ray based
imaging procedure, a nuclear medicine scan utilizing MAG3* can
accurately assess renal tubular function in addition to providing
anatomical information. In 1991, the company introduced the highly
successful UltraTag* RBC blood pool imaging kit which is used for
gated blood pool, "first pass" cardiac studies, and for the detection
of hemangiomas and gastrointestinal bleeding sites. In 1995, to meet
growing worldwide demand for cyclotron-produced products, Medical
expanded cyclotron capacity at its radiopharmaceutical production
facility in Maryland Heights, Missouri. Medical also brought a new
cyclotron on-line at Petten, Netherlands in 1993. Medical is also
expanding the Maryland Heights, Missouri manufacturing facility to
introduce an improved generator product.
Current research efforts in this area are directed to development of
compounds to alleviate cancer-related bone pain, detect several types
of cancer, and evaluate heart disease.
Imaging manufacturing facilities are located in Angleton, Texas;
Maryland Heights, Missouri; Mexico City, Mexico; Mulhuddart, Ireland;
Petten, Netherlands; Pointe Claire, Canada; Raleigh, North Carolina;
and St. Louis, Missouri. Medical owns these facilities. The company
also operates 34 nuclear pharmacies located in population centers
throughout the U.S.
Anesthesiology & Critical Care
------------------------------
Anesthesiology products include continuous core temperature monitoring
systems; convective warm air temperature management systems; tracheal
tubes, tracheostomy tubes, breathing systems and other disposables;
and airway management products. Continuous core temperature
monitoring and temperature management systems are utilized both in
surgical procedures and postoperatively. The airway management
product line consists of basic and specialty tracheal tubes used in
hospitals for maintaining a secure airway during anesthesia and
intensive care, and tracheostomy tubes which are used in hospitals and
alternate site facilities for maintaining airways during respiratory
care. Anesthesiology products are marketed directly through Medical's
geographically organized sales force and through distributors in
the U.S. and internationally.
In June 1995, Medical acquired Alton Dean, Inc. of Salt Lake City,
Utah to complement its temperature management business. Alton Dean's
products include in-line sterile fluid warmers, pressure infusers, and
irrigation pumps used in operating rooms and intensive care units.
These products are marketed through distributors in the U.S. and
Europe.
In 1994, Medical acquired DAR S.p.A. of Mirandola, Italy to complement
its tracheal and tracheostomy tube business and expand the core airway
management business into related anesthesia and respiratory
disposables. DAR products include disposable filters, heat/moisture
exchanges, masks and breathing circuits used in operating rooms and
intensive care units to provide respiratory support to critically ill
patients.
In 1994, Juarez, Mexico became the new production base for the
temperature monitoring systems products used in emergency and critical
care settings. Medical capitalized on the rapid conversion to
disposable tracheal tubes in Europe by expanding its anesthesiology
products plant in Athlone, Ireland. Also, as discussed earlier, a
portion of the Argyle, New York tracheal tube manufacturing operations
will be relocated to a new facility under construction in Juarez,
Mexico.
In 1993, Medical expanded its airway management product line by
acquiring the tracheostomy products business of Sorin Biomedical in
Irvine, California. This business's products include a broad range of
tracheostomy tubes and related accessories used to maintain the airway
after a tracheostomy surgical procedure.
In critical care, Medical provides instruments and systems to analyze
blood gases and electrolytes, and systems for blood hemoglobin and
glucose analysis. GEM*-STAT is designed for use in low-volume
intensive care units, while GEM*-6 provides testing in the operating
room, primarily for cardiovascular surgery. The GEM* Premier is a user
friendly product which has a high capacity and is more cost-effective
than competing whole-blood analyzers. The GEM* Premier is utilized in
intensive care units as well as in hospital stat and central
laboratories. These products are sold directly to hospitals in the
U.S. by the geographically organized sales force and through direct
sales forces and distributors in international markets.
During 1993, Medical acquired the HemoCue businesses; HemoCue A.B. of
Angelholm, Sweden and HemoCue Inc. of Mission Viejo, California.
HemoCue products include blood hemoglobin and glucose analysis systems
for use in hospitals and alternate site facilities. These products are
distributed directly by the company and through independent
distributors in the U.S. and internationally.
Anesthesiology and critical care manufacturing facilities are located
in Angelholm, Sweden; Ann Arbor, Michigan; Argyle, New York; Athlone,
Ireland; Irvine, California; Juarez, Mexico; Mirandola, Italy; Salt
Lake City, Utah; and Vitrolles, France. Medical owns the Argyle,
Athlone and Mirandola facilities. The remainder are leased.
The company has distribution locations in Athlone, Ireland; Brussels,
Belgium; Catano, Puerto Rico; Earth City, Missouri; Evry Cedex,
France; Gemenos, France; Hennef, Germany; Madrid, Spain; Mexico City,
Mexico; Milan, Italy; Mission Viejo, California; Northampton, United
Kingdom; Nottinghill, Australia; Petten, Netherlands; Pointe Claire,
Canada; Singapore; Tokyo, Japan; Vienna, Austria; and Zurich,
Switzerland. Medical owns the facilities in Athlone, Mexico City,
Petten and Pointe Claire. The remainder are leased.
Mallinckrodt Veterinary
-----------------------
Veterinary sales were:
Years ended June 30,
--------------------
1995 1994 1993
---- ---- ----
(in millions)
Net sales
Animal Health................................ $455 $430 $449
Feed Ingredients............................. 169 162 169
---- ---- ----
$624 $592 $618
==== ==== ====
Mallinckrodt Veterinary, Inc. and its subsidiaries, collectively are
called "Veterinary," unless otherwise indicated by the context.
Veterinary initiated the restructure of its global operations during
1993 to improve operating earnings and growth potential by
strengthening its global distribution and marketing capabilities and
consolidating manufacturing facilities to improve worldwide product
sourcing and increase plant utilization. Under a separate
organizational related program, Veterinary recently completed its
senior management team to provide strength and focus to further
enhance growth and earnings potential.
To date under the 1993 restructuring program, approximately 1,000
positions have been eliminated; 10 manufacturing facilities have been
closed; more than 200 low margin products have been dropped from the
lines offered by the company; commercial and administrative functions
have been streamlined, including consolidation of most of the research
and development operations to one global facility located near the
corporate headquarters; and non-core businesses and high risk
development projects that have diminished in potential have been
exited, including a project for the development of a porcine
somatotropin (PST) product under the name Grolene*.
Pre-tax cash expenditures for restructuring are expected to
approximate the original 1993 estimate of $162 million and the 1994
adjustment of $20 million and are primarily related to manufacturing
rationalization, productivity improvement and organization development
costs of $132 million and severance costs of $50 million. The $121
million noncash portion of the charge primarily related to the
write-off of plant facilities. Approximately $68 million of the cash
expenditures were incurred through June 30, 1995, the majority related
to severance from a workforce reduction of approximately 1,000 people
and consulting costs. The majority of the remaining cash expenditures
relate to manufacturing rationalization to be paid in 1996 and the
present value of long-term lease payments. Based on the expenditures
to date and those anticipated by the original plan, no significant
adjustment to the reserve balance is expected at this time.
Veterinary ranks in the top seven companies in the animal health
industry worldwide in terms of sales, following major consolidation
within the industry during 1995, and continues to have direct
presence in the top 25 animal health markets of the world, with more
than half its net sales originating outside the U.S. Veterinary
focuses on four strategic segments, or two-thirds, of the $13 billion
market for animal health products: pharmaceuticals, biologicals,
veterinary specialties and feed ingredients.
Veterinary operations support a product line approaching 1,000
products. The company's strategy calls for selective additions of new
products and for geographic expansion into new markets. Veterinary
continues to focus its efforts on product areas that offer the
greatest opportunities. Consequently, Veterinary expects to continue
to derive most of its sales and profit from the food animal sector,
while selectively developing product lines in the companion animal
market, and through specialty distribution. In the worldwide animal
health industry, products for food animals comprise nearly 80 percent
of the market. Approximately 85 percent of Veterinary's revenues are
from products used for food animals.
Cross registration, or filing for approval of products already
marketed in other countries, is a key component of Veterinary's
geographic expansion efforts. Approximately 450 product approvals
have resulted from cross-registration through 1995, with additional
approvals expected over the next three to five years.
Operations are currently located in more than 30 countries, with
distribution networks in approximately 100 nations. Veterinary's
organizational structure (four geographic regions and the Feed
Ingredients business, primarily but not exclusively in the U.S.) is
aligned for increased market focus and customer responsiveness and
enables sales directly to the consumer, veterinarian, distributor,
dealer or agent, depending on the maximum market opportunity.
Animal Health
-------------
Asia Pacific
Veterinary intends to focus on improving its leading position in
Australia, New Zealand and Southeast Asia. It will maintain regional
leadership by maximizing cross registration opportunities and by
introducing new products. Veterinary is increasing its presence in
Japan and adding resources to take advantage of the growth potential
in developing nations such as China.
Europe
Veterinary will build on its leading market positions across the
region through cross registration of existing products and
introduction of new products, by improving leverage and focusing on
key regional brands. France, Germany, and Spain represent the
greatest potential opportunity and this strategy will lead to above
average market growth. Veterinary is positioned to maximize market
opportunities as they evolve in Eastern Europe, Africa and the Middle
East.
Important products in Europe are Rotavec* and Leptavoid*, biological
vaccines for food animals; Pulse Release Bolus*, a de-wormer for
cattle; and Spot-On*, an ectoparasiticide for cattle. Late in 1995,
the launch of EXspot*, a flea and tick product for companion animals,
was met with strong customer acceptance in Germany. Launch of Exspot*
in other European markets is expected in 1996 and beyond.
Latin America
In this growing region, Veterinary maintains a leading position in
cattle products and expects to increase market share from a
combination of new products and cross registration. Veterinary will
explore distribution opportunities to replace our loss during 1995 of
rights to distribute products of Wellcome and Wyeth.
The foot and mouth disease vaccine continues to be a prominent product
in the region.
General economic conditions within the region remained relatively
stable during 1995, with the exception of the devaluation of the peso
in Mexico, which had no significant impact on Veterinary's results.
The Brazilian market accounts for more than half of the region's
earnings. Although no significant changes to general economic policy
or political conditions are anticipated within the region, the short
term economic outlook remains uncertain.
North America
Veterinary has a significant position in North America. Ralgro*,
Veterinary's long-established and consistent performer, is the leading
growth promotant for cattle on grass in the U.S. Veterinary intends
to leverage cattle knowledge and strong customer service capabilities
to build a strong position for new cattle and swine products. Ralgro
Magnum*, a more potent formulation of Ralgro* for improved gain and
efficiency in feedlot cattle, was launched in late 1995.
Veterinary entered into a global technology and product exchange
agreement with Boehringer Ingelheim Animal Health, Inc., St. Joseph,
Missouri, in August, 1994. The agreement granted the company the right
to market and distribute certain Boehringer Ingelheim cattle
respiratory vaccines in the United States under the Strategy* brand
name. The agreement also provides Veterinary with respiratory vaccine
antigens and technology which are expected to enable it to develop
second-generation vaccines with enhanced duration, effectiveness and
safety.
In 1994, Veterinary committed to a biological production facility to
be built in Raleigh, North Carolina. The $31 million, 63,000
square-foot plant is expected to begin commercial production in 1997
and will produce livestock and companion animal vaccines for
distribution around the world.
Manufacturing Facilities
Animal health manufacturing facilities are located in Asuncion,
Paraguay; Baton Rouge, Louisiana; Bray, Ireland; Burgwedel, Germany;
Cali, Colombia; Compton, United Kingdom; Friesoythe, Germany; Kansas
City, Kansas; Kuala Lumpur, Malaysia; Manila, Philippines; Millsboro,
Delaware; Sao Paulo, Brazil; Terre Haute, Indiana; and Upper Hutt, New
Zealand.
Feed Ingredients
----------------
Feed Ingredients contributes about 25 percent of Veterinary's total
sales, primarily serving the U.S. market. Asia, Canada and Latin
America are other Feed Ingredients markets. Veterinary has a
strong brand position in this market with feed supplements such as
Monofos*, Biofos*, Dynafos*, Dyna-K* and Dynamate*.
Veterinary owns a feed phosphate plant adjacent to the phosphate
chemical complex of IMC Global Operations Inc. (IGL), formerly IMC
Fertilizer Group, Inc. (IFL), in New Wales, Florida. Under an
agreement which expires in 1997, IGL operates the Veterinary plant.
Veterinary also contracts with IGL for key raw materials including
phosphoric acid and phosphate rock. IGL also supplies Veterinary's
requirements of animal feed-grade potassium products. Veterinary
believes there are adequate sources of supply from other producers in
the event these supply agreements are not renewed. Market prices may
be different than current contract rates.
OTHER ACTIVITIES
----------------
Research and Development
------------------------
The Company performs applied research directed at development of new
products, development of new uses for existing products and
improvement of existing products and processes. Research and
development programs include laboratory research as well as product
development and application.
Mallinckrodt Chemical research and development efforts are organized
within its operating divisions to focus technical resources on the
development of new and improved products meeting defined market and
customer needs. Technical personnel for process support are located at
each manufacturing location. Internal research effort is supplemented
with third-party and university technical agreements.
Mallinckrodt Medical research and development efforts are coordinated
on a worldwide basis by a senior scientist. Research and development
of imaging and therapeutic products are carried on by a centralized
organization. Research and development for anesthesia and critical
care are performed within these businesses. Mallinckrodt Medical's
various development activities are focused on market-place needs.
Internal research effort is supplemented with third-party and
university technical agreements.
Mallinckrodt Veterinary currently has many products under development
that address the needs of world and regional markets. The company
consolidated its primary research and development capabilities at a
single site in the Chicago, Illinois area in 1993, in conjunction with
the restructuring of its businesses. Products in development include
vaccines, growth enhancers and parasiticides for livestock, poultry
and companion animals. To supplement its own research, Mallinckrodt
Veterinary has technical agreements with various pharmaceutical and
biotechnology companies and universities.
Patents, Trademarks, and Licenses
---------------------------------
Mallinckrodt owns a number of patents and trademarks, has a
substantial number of patent applications pending and is licensed
under patents owned by others. No single patent is considered to be
essential to the businesses as a whole, but in the aggregate, the
patents are of material importance to the Company's business.
Environmental and Other Regulatory Matters
------------------------------------------
The Company is subject to various environmental protection and
occupational safety and health laws and regulations in the United
States and foreign countries in which it operates. In addition, in its
current operations and over the years, the Company has handled, and
will continue to deal in or otherwise handle, materials and wastes
classified as hazardous or toxic by one or more regulatory agencies.
The Company is also subject to the Federal Food, Drug, and Cosmetic
Act, other federal statutes and regulations, various state statutes
and regulations, and laws and regulations of foreign governments,
affecting and involving testing, approval, production, labeling,
distribution, post-market surveillance and advertising of most of the
Company's existing, new and prospective products.
Significant capital expenditures, as well as operating costs, have
been incurred on account of the laws and regulations governing the
protection of the environment, occupational safety and health, and the
handling of hazardous materials. There are inherent and unquantifiable
risks in mishandling, or potential accidents involving, hazardous or
toxic materials and wastes. On the basis of its best information and
belief, the Company does not believe the expenditures and risks
occasioned by these circumstances have as yet become materially
adverse to its operations or financial condition taken as a whole;
however, no assurance can be given that this will continue to be true.
Similarly, the interpretation and enforcement of the laws and
regulations pertaining to the Company's products or facilities by
government agencies, such as the U.S. Food and Drug Administration and
the U.S. Environmental Protection Agency (EPA), and state and foreign
counterparts, at any particular production site or in connection with
any particular product or any proposed new or modified product, may be
more strict than anticipated, and could result in production
interruption and product holds or recalls.
The Company endeavors to comply with all of these laws and
regulations, as well as with all other applicable laws and
regulations, but there can be no assurance compliance will always be
achieved. Instances of non-compliance have occurred in the past and
although they have not had a material adverse impact on the Company,
such instances could occur in the future and possibly have a material
adverse impact.
In particular, the Company is unable to predict the extent to which it
may be adversely affected by future regulatory developments such as
new or changed laws or regulations.
Most of the Company's environmental related capital expenditures are
in response to provisions of the Federal Clean Air Act, Water
Pollution Control Act, Resource Conservation and Recovery Act,
Comprehensive Environmental Response, Compensation, and Liability Act,
land use, air and water protection regulations of the various
localities and states, and their foreign counterparts. Capital
expenditures worldwide relating to air emission control, wastewater
purification, land reclamation and solid waste disposal totaled
approximately $14 million in 1995 and 1994. The Company currently
estimates that environmental capital expenditures over the next two
years will average about $16 million per year.
Environmental clean up costs are often incurred over extended periods
of time. Nevertheless, to the extent these costs can be reasonably
estimated, and the Company's responsibility is probable, accruals are
established although the costs are not yet payable, and are reflected
in the Company's consolidated financial statements.
See also Item 3., Legal Proceedings, and Note 20 of the Notes for
additional information.
Employees
---------
Mallinckrodt had 10,300 employees at June 30, 1995, consisting of
6,500 U.S. based employees and 3,800 employees outside the U.S.
Approximate number of employees by business segment are: Mallinckrodt
Chemical, 3,300; Mallinckrodt Medical, 4,800; and Mallinckrodt
Veterinary, 2,125. Approximately 75 employees are engaged in
corporate activities.
Labor Relations
---------------
In the U.S., the Company has ten collective bargaining agreements with
nine U.S. international unions or their affiliated locals covering 858
employees. Two agreements covering 205 employees were negotiated
during 1995, both with no work stoppages. Four agreements covering
498 employees will expire in 1996. Twelve operating locations outside
the U.S. have collective bargaining agreements and/or work counsel
agreements covering approximately 1,169 employees. Recent wage and
benefit increases were consistent with competitive industry and
community patterns.
Issuance of Long-Term Debt
--------------------------
On September 15, 1995, the Company issued $100 milliion of 6.75%
Notes, due September 15, 2005, from the Company's Registration
Statement on Form S-3 (No. 33-57821). Net proceeds totaled $99
million, which will be used to reduce outstanding commercial paper and
for other general corporate purposes.
ITEM 2. PROPERTIES
Information regarding the principal plant and properties of
Mallinckrodt is included in the respective business segment
discussions in Item 1., Business. Additionally, at June 30, 1995
Mallinckrodt Medical and Mallinckrodt Veterinary occupy office and
laboratory space owned by those companies in St. Louis, Missouri and
Mundelein, Illinois, respectively. Mallinckrodt Chemical and
Mallinckrodt Group lease office space in St. Louis, Missouri.
The Company believes its manufacturing and distribution facilities at
June 30, 1995 are adequate, suitable and of sufficient capacity to
support its current operations.
ITEM 3. LEGAL PROCEEDINGS
Environmental Matters
---------------------
The Company's operations are subject to a variety of federal, state
and local environmental laws and regulations that govern, among other
things, the generation, handling, storage, transportation, treatment
and disposal of hazardous substances, discharges to water, and air
emissions from equipment and facilities. The Company is involved in
various administrative or judicial proceedings relating to the
environment that have been initiated by EPA, by state authorities, or
by third parties. These proceedings are in various stages of
development and generally include demands for reimbursement of
previously incurred costs and for future investigation or remedial
actions. In many instances, the dollar amount of the claim is not
specified. For some sites, other potentially responsible parties may
be jointly and severally responsible, along with the Company, to pay
remediation and other related expenses. For other sites, the Company
may be solely responsible for remediation and related costs. The
Company anticipates that a portion of these costs will be covered by
insurance or third party indemnities. A number of the currently
pending matters relate to discontinued operations of the Company.
To the extent costs and related liabilities for environmental matters
can be reasonably estimated and the Company's responsibility is
probable, accruals are established although costs are not yet payable.
In establishing accruals the Company considers, among other things:
its past experience at the site in question and at other sites; the
probable costs to be paid by other potentially responsible parties, if
any; total projected remediation costs for the site, if known;
existing technology; and the currently enacted laws and regulations.
The Company frequently engages qualified environmental contractors to
assist it in evaluating and developing an appropriate response to
environmental claims.
Although it is not possible to predict with certainty the outcome of
such matters or the total cost of remediation efforts, the Company
does not believe that the ultimate disposition of pending
environmental matters will have a material adverse effect on the
Company's financial condition or the results of the Company's
operations. The following is a brief discussion of certain pending
environmental proceedings which the Company believes, based on
currently available information, are most significant:
Auburn Hills, MI -- The Company is a defendant in an action brought by
the State of Michigan in 1986, relating to a drum reconditioning
facility located in Auburn Hills, Michigan, that was leased and
operated by the Company in the 1970s. The State and the present owner
of the facility allege that the Company is jointly and severally
liable, along with approximately twenty other former owners and
operators of the facility, for contamination of soil and surface
groundwater resulting from improper disposal practices. The State
seeks remedial measures at the site and reimbursement for costs
incurred to date. The current owner seeks reimbursement for
previously incurred clean-up costs and compensation for damages to the
site. The Company has filed a third-party complaint against
approximately 110 parties that sent drums to the facility, seeking
contribution for damages that might be assessed against the Company.
The court has not held any hearings on this case since 1987 and has
stayed all third party proceedings. In March 1995, the State issued a
proposed remedial action plan (PRAP) for public comment. The Company
has submitted formal comments on the PRAP and continues to develop
further site information it believes could reduce remediation costs.
Since the litigation is dormant and the State has not responded to
comments received by it on the PRAP, it is not possible to estimate
the Company's potential liabiality at this time.
Ashtabula County, OH -- In 1985, EPA asserted a claim against the
Company and numerous other potentially responsible parties concerning
the contamination of a stream near Ashtabula, Ohio, where the Company
had operated a chloralkali plant for approximately eight years until
1982. EPA ordered the respondents to conduct studies and undertake
preliminary design work for remedial activities. EPA also filed suit
in 1990 seeking recovery of its past response costs. The Company and
several other respondents settled the past-costs claim with EPA in
1992. A remedial action plan is currently being prepared for the site
and the Company and most, but not all, of the other potentially
responsible parties have entered into an agreement to fund the
clean-up. At this time, it is not possible to determine the Company's
allocable share of the clean-up costs.
Orrington, ME -- Hanlin Group, Inc. purchased a chemical manufacturing
facility located in Orrington, Maine from the Company in 1982. In
1989, Hanlin filed suit in federal court alleging that the Company had
operated the facility in violation of federal and state environmental
laws. More specifically, Hanlin asserted that the Company had allowed
the discharge of unlawful amounts of mercury, contaminating the soil,
air, ground water and adjoining waterways. Hanlin also alleged that
the Company illegally caused carbon tetrachloride and chloroform
contamination at the facility. The parties settled these claims in
1991. The facility was subsequently sold to HoltraChem Manufacturing
Company, L.L.C.; the settlement agreement was assigned to HoltraChem
as part of the sale. Under the settlement agreement, the Company
agreed to pay specified costs of a study ordered by EPA. Costs of
implementing remedial action at the site cannot be estimated at this
time and will be shared by the Company and HoltraChem on a yet-to-be
agreed basis.
For additional information relating to environmental matters, see Item
1., Business--Environmental and Other Regulatory Matters.
Other Litigation
----------------
The Company is a party to a number of other legal proceedings arising
in the ordinary course of business. The Company does not believe that
these pending legal matters will have a material adverse effect on its
financial condition or the results of the Company's operations.
Other previously reported legal proceedings have been settled or the
issues sufficiently resolved so as to not merit further reporting.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the three months
ended June 30, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The ages and five-year employment histories of Mallinckrodt's
executive officers at June 30, 1995, were as follows:
C. Ray Holman
-------------
Age 52. Chairman of the Company since October 1994; President and
Chief Executive Officer of the Company since December 1992; Vice
President of the Company from October 1990 to December 1992; President
and Chief Executive Officer, Mallinckrodt Medical, Inc., from January
1989 until December 1992.
Barbara A. Abbett
-----------------
Age 55. Vice President, Communications of the Company since April
1994; Vice President and Senior Partner with Fleishman-Hillard, Inc.,
from 1979 to April 1994.
Ashok Chawla
------------
Age 46. Vice President, Strategic Management of the Company since
July 1991; Vice President Strategic Planning and Business Development
of Mallinckrodt Veterinary, Inc., from August 1990 to July 1991;
Division Director, Finance and Administration for Mallinckrodt, Inc.
Europe from August 1988 to August 1990.
Paul D. Cottone
---------------
Age 47. Senior Vice President of the Company since October 1994;
President and Chief Executive Officer of Mallinckrodt Veterinary, Inc.
since October 1994; Vice President, U.S. Operations of the Merck AgVet
Division from 1993 to October 1994; Executive Director, International
Operations of the Merck AgVet Division from 1987 to 1993.
Bruce K. Crockett
-----------------
Age 51. Vice President, Human Resources of the Company since March
1995; Vice President, Organization Development at Eastern Enterprises
from 1990 to February 1995.
Roger A. Keller
---------------
Age 50. Vice President, Secretary, and General Counsel of the Company
since July 1993; Senior Vice President and General Counsel,
Mallinckrodt Medical, Inc., from March 1992 to July 1993; Vice
President and General Counsel of Mallinckrodt Medical, Inc., from
September 1989 to March 1992.
Robert G. Moussa
----------------
Age 48. Senior Vice President of the Company since October 1993; Vice
President of the Company from December 1992 to October 1993; President
and Chief Executive Officer of Mallinckrodt Medical, Inc., since
December 1992; Senior Vice President and Group Executive, Mallinckrodt
Medical, Inc., from September 1992 to December 1992; Group Vice
President, International, Mallinckrodt Medical, Inc., from January
1989 to September 1992.
Mack G. Nichols
---------------
Age 57. Senior Vice President of the Company since October 1993; Vice
President of the Company from October 1990 to October 1993; President
and Chief Executive Officer of Mallinckrodt Chemical, Inc. since
January 1989.
Michael A. Rocca
----------------
Age 50. Senior Vice President, Chief Financial Officer and Treasurer
of the Company since April 1994; Corporate Vice President and
Treasurer of Honeywell Inc. from March 1992 to April 1994; Vice
President, Finance, for Honeywell Europe from 1990 to 1992.
William B. Stone
----------------
Age 52. Vice President and Controller of the Company since November
1990 and Vice President of Mallinckrodt, Inc., since April 1983;
Assistant Controller and Corporate Staff Vice President of the Company
from October 1989 to November 1990.
Miscellaneous
-------------
All of the Company's officers are elected annually, with the terms of
the officers listed above to expire in October 1995. No "family
relationships" exist among any of the listed officers.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Common Stock Prices and Dividends
---------------------------------
Quarter
-----------------------------
First Second Third Fourth
----- ------ ----- ------
Fiscal 1995
Dividends per common share..........$ .125 $ .14 $ .14 $ .14
Common stock prices
High.............................. 34.00 34.13 34.63 36.88
Low............................... 28.38 29.00 29.13 33.50
Fiscal 1994
Dividends per common share.......... $.11 $.125 $.125 $.125
Common stock prices
High.............................. 33.38 36.63 38.50 34.50
Low............................... 28.13 32.25 30.13 28.50
The principal market on which Mallinckrodt Group's common stock is
traded is the New York Stock Exchange. Common stock prices are from
the composite tape for New York Stock Exchange issues, as reported in
The Wall Street Journal. As of July 31, 1995, the number of
registered holders of common stock, as reported by the Company's
registrar, was 9,509.
ITEM 7. MALLINCKRODT MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
1995 vs. 1994
-------------
Mallinckrodt's 1995 earnings from continuing operations were $184
million, or $2.37 per share. These results, compared with 1994
earnings from continuing operations, excluding a restructuring charge
and minor non-recurring adjustments, were up 13 percent.
Net earnings for 1995 were $180 million, or $2.32 per share, compared
with $104 million, or $1.33 per share, in 1994. Included in the prior
year results was an after-tax restructuring charge totaling $59
million, or $.76 per share.
Net sales increased 14 percent to $2.2 billion, compared to $1.9
billion last year. Operating earnings for 1995 were $329 million, up
15 percent over comparable 1994 results excluding the restructuring
charge. Each of Mallinckrodt's three businesses contributed to sales
and earnings growth in 1995.
Restructuring charges are discussed in the business sections which
follow, and in Note 1 of Notes to Consolidated Financial Statements
(Notes). Charges for discontinued operations are discussed in Note 1
of the Notes.
1994 vs. 1993
-------------
Before a restructuring charge Mallinckrodt's 1994 earnings from
continuing operations were $166 million, or $2.14 per share.
Comparable 1993 earnings from continuing operations were $128 million,
or $1.65 per share. After further excluding favorable 1994 tax
adjustments totaling $3 million, or $.04 per share, from tax law
changes and a 1993 non-recurring corporate expense charge of $3
million after taxes, or $.04 per share, 1994 results were 24 percent
higher than those of 1993.
Net earnings for 1994 were $104 million, or $1.33 per share, compared
with a net loss of $200 million, or $2.60 per share, in 1993. Included
in these results were after-tax restructuring charges totaling
$59 million, or $.76 per share, and $242 million, or $3.13 per share,
for 1994 and 1993, respectively. The loss in 1993 also included a
noncash cumulative charge of $81 million, or $1.04 per share, for
adoption of new standards of accounting for income taxes and certain
postretirement/postemployment benefits.
Net sales for 1994 were $1.9 billion, compared with $1.8 billion in
1993. This 8 percent increase was achieved despite slower volume
growth and pricing pressures. Each of Mallinckrodt's three businesses
reported improved operating results for 1994. Operating earnings
before the restructuring charges were $287 million in 1994, compared
with $225 million in 1993. Excluding the 1993 non-recurring corporate
expense charge, operating earnings were up 24 percent.
<PAGE>
MALLINCKRODT CHEMICAL
Years ended June 30,
--------------------
1995 1994 1993
---- ---- ----
(in millions)
Net sales:
Catalysts, Performance & Lab Chemicals $318 $212 $183
Pharmaceutical Specialties 259 225 212
---- ---- ----
$577 $437 $395
Operating earnings (loss):
Ongoing operations $ 69 $ 62 $ 46
Restructuring charge (51)
---- ---- -----
69 62 (5)
Pre-tax equity in joint venture 25 18 10
---- ---- -----
Earnings $ 94 $ 80 $ 5
==== ==== =====
Ongoing operating earnings as a
percent of sales 11.9% 14.1% 11.6%
1995 vs. 1994
-------------
Mallinckrodt Chemical achieved earnings of $94 million, including a
$25 million pre-tax equity-investment share of earnings from
Tastemaker, the flavors joint venture. This represented a 17 percent
earnings improvement over the prior year. Net sales increased 32
percent to $577 million. The 1993 restructuring program was
substantially completed during 1995, with the exit of the
photochemicals business.
Catalysts, performance and lab chemicals made a significant
contribution to 1995 results with a 50 percent increase in sales.
Results benefited from the acquisition of Catalyst Resources, Inc. in
March 1994 and the reclassification of a small specialty chemical
business to continuing operations. The acquisition of J.T. Baker in
February 1995 enhanced sales performance, but modestly impaired
operating earnings through normal acquisition accounting adjustments.
Management expects J.T. Baker to contribute to sales and earnings
growth in 1996. Worldwide strength in the existing catalysts business
also contributed favorably to the sales and earnings improvements in
1995.
Pharmaceutical specialties sales improved 15 percent. Continued
strength in sales volume for medicinal narcotics was the main
contributor to the increase. Higher worldwide acetaminophen (APAP)
sales volume, improved plant performance in Raleigh, North Carolina,
and higher sales in peptides also provided favorable benefits in 1995.
Earnings results for Tastemaker increased 37 percent to $25 million
due to strong worldwide sales growth and continued manufacturing cost
improvements.
1994 vs. 1993
-------------
Mallinckrodt Chemical's 1994 operating earnings of $62 million and an
$18 million pre-tax equity-investment share of earnings from its
Tastemaker flavors joint venture totaled $80 million. Excluding the
1993 restructuring charge, this represented a 42 percent earnings
improvement over 1993. Net sales increased 11 percent to $437 million.
The 1993 restructuring program is producing anticipated results with
the exit of the aromatic flourine intermediates business substantially
completed in 1994.
Catalysts, performance and lab chemicals sales increased 15 percent,
principally from higher sales volume in catalysts and performance
chemicals. Improved plant operations in performance chemicals and
favorable comparisons in restructured businesses also contributed to
higher operating earnings in 1994.
Pharmaceutical specialties sales increased 6 percent. Contributing
significantly to improved operating results were higher worldwide
medicinal narcotics sales primarily due to increased sales volume and
improved medicinal narcotics plant operations. Results for 1994 were
negatively affected by a scheduled Raleigh, North Carolina, plant
maintenance shutdown in the first quarter, additional investment in
the peptides business and flat APAP worldwide sales compared with
1993.
The Tastemaker flavors joint venture made a significant contribution
to the 1994 results with a 75 percent increase in earnings due to
strong worldwide growth and efficiencies from manufacturing
consolidation programs completed in 1993.
MALLINCKRODT MEDICAL
Years ended June 30,
--------------------
1995 1994 1993
---- ---- ----
(in millions)
Net sales:
Imaging $ 688 $622 $564
Anesthesiology & Critical Care 324 290 219
------ ---- ----
$1,012 $912 $783
====== ==== ====
Operating earnings (loss):
Ongoing operations $ 228 $203 $174
Restructuring charge (74)
------ ----- ----
$ 228 $129 $174
====== ===== ====
Ongoing operating earnings as a
percent of sales 22.6% 22.2% 22.3%
1995 vs. 1994
-------------
Mallinckrodt Medical's operating earnings were $228 million, up 13
percent, excluding the prior year restructuring charge. Net sales
reached $1.0 billion, an increase of 11 percent from $912 million the
year before.
Contributing to the improved operating earnings were results of
actions related to the restructuring program begun last year. Such
actions included reorganization of the U.S. sales structure and non-
sales related functions and management processes, relocation costs for
manufacturing operations and a workforce reduction of approximately
600 positions, of which 500 was contemplated in the 1994 restructure
plan. The restructuring program is on track and is producing
anticipated results. Annual pre-tax savings from the restructuring
will be approximately $40 million, with about $11 million achieved in
1995 and the rest to be achieved in 1996. Pre-tax cash expenditures
should approximate the original estimate of $65 million.
Imaging sales increased 11 percent, benefiting principally from higher
worldwide sales volume of the X-ray contrast medium Optiray*,
partially offset by pricing pressures in the U.S. Increased U.S.
sales volume of TechneScan MAG3*, the introduction of OctreoScan* and
higher sales of nuclear medicine products in Europe due to growth in
existing markets, also contributed to the improved results. Albunex*
was introduced through a controlled launch in 1995 giving Medical the
first ultrasound contrast media product in the U.S. market. Market
penetration has been slower than initial expectations; however,
management expects ultrasound contrast media to be a very significant
growth opportunity for the company.
Anesthesiology and critical care sales were up 11 percent for the
year, boosted by the September 1994 acquisition of DAR S.p.A., higher
anesthesia product sales in Europe and Japan and increased sales
volume of hemoglobin testing products in the U.S. and Europe.
Management expects the June 1995 acquisition of Alton Dean, Inc., a
manufacturer of products that warm sterile intravenous and irrigation
solutions used during and after surgery, to contribute to future
results.
1994 vs. 1993
-------------
Mallinckrodt Medical's 1994 net sales were $912 million and operating
earnings before a restructuring charge were $203 million, both up 16
percent from 1993.
The 1994 pre-tax restructuring charge of $74 million resulted from
fourth quarter decisions made pursuant to efforts conducted to develop
strategies to effectively respond to customer needs and compete in a
market that is changing rapidly as the result of health care reform.
The key components of the charge were reorganization of the current
medical specialty oriented U.S. sales structure into a unified sales
organization divided into geographical districts; reorganization to
reduce, centralize and standardize certain non-sales related functions
and management processes; relocation of the Argyle, New York,
endotracheal tube manufacturing operations to existing plants in
Athlone, Ireland, and Irvine, California, and a new facility under
construction in Juarez, Mexico; and severance costs related to an
associated workforce reduction of approximately 500 employees at
various locations around the world.
Imaging sales increased 10 percent. Higher Optiray sales volume in
the U.S., Japan and Europe and increased catheter sales volume were
the primary contributors to the improvement. The earnings effect of
the higher sales was partially offset by higher standard product costs
associated with the new Ireland Ioversol production facility and
pricing pressures related to Optiray. The Optiray production capacity
expansions underway in 1993 were essentially complete. Higher sales
volume in the U.S. and Europe associated with thallium and TechneScan
MAG3 were partially offset by unfavorable foreign exchange rates and
price pressures. In June 1994, OctreoScan, a radiopharmaceutical used
to aid diagnosis of certain cancer tumors, received FDA approval.
Management received approval of Albunex, its ultrasound contrast agent
in August 1994.
Strong results for the anesthesiology and critical care business were
a significant factor in the overall year-to-year comparison. Sales
increased 32 percent. Newly acquired businesses and improved U.S.
sales associated with HemoCue as a result of hemoglobin products
receiving waiver status contributed to the improvement. Operating
earnings increases were partially offset by unfavorable year-to-year
foreign currency effects and amortization of intangibles related to
acquisitions.
MALLINCKRODT VETERINARY
Years ended June 30,
--------------------
1995 1994 1993
(in millions)
Net sales:
Animal Health $455 $430 $449
Feed Ingredients 169 162 169
---- ---- ----
$624 $592 $618
==== ==== ====
Operating earnings (loss):
Ongoing operations $ 61 $ 53 $ 40
Restructuring charge (20) (283)
---- ----- -----
$ 61 $ 33 $(243)
==== ===== ======
Ongoing operating earnings as a
percent of sales 9.8% 8.9% 6.5%
1995 vs. 1994
-------------
Mallinckrodt Veterinary's operating earnings were $61 million, up 16
percent, excluding the prior year restructuring charge. Net sales
were $624 million, up 5 percent compared to $592 million the prior
year. Contributing to the improved operating earnings were improved
sales volumes in Europe, favorable currency effects, principally in
Europe and Latin America, and the favorable impacts of actions related
to the restructuring program begun in 1993, which included various
cost control measures, plant closures and a workforce reduction of
approximately 1,000 employees.
Animal health sales increased 6 percent for the year. Sales volume
growth was highest in Europe due to increases across all major product
lines. Sales in Asia improved primarily from higher volumes of
biological products.
Feed ingredients sales were up 4 percent compared to the prior year,
due to strong volume gains and favorable price variances in the fourth
quarter.
Veterinary will build on the strength of its recently completed
management team to focus on future growth and earnings improvement.
1994 vs. 1993
-------------
Mallinckrodt Veterinary's 1994 operating earnings of $33 million
included a pre-tax restructuring charge of $20 million to adjust a
1993 provision associated with the decision to discontinue development
of porcine somatotropin (PST) in May 1993. This adjustment effectively
removed all remaining PST valuation risk.
Excluding restructuring charges in both years, Mallinckrodt
Veterinary's 1994 operating earnings increased 31 percent compared to
1993 on a sales decline of 4 percent. Improved operating earnings
resulted from actions related to the restructuring program begun in
1993, which included various cost control measures, plant closures and
a workforce reduction of approximately 1,000 employees. Lower sales
resulted primarily from global product rationalization programs
designed to eliminate low margin products and from unfavorable
currency translation effects.
Animal health sales for 1994 decreased 4 percent. Product
rationalization programs, biological supply and production problems,
lower volumes of companion animal vaccine sales in North America and
unfavorable currency translation effects were the primary reasons for
the decrease. Partially offsetting the decrease were strong sales of
parasiticides in Europe, higher sales volume in Brazil resulting from
expanded distribution rights and improved foot and mouth disease
vaccine sales, increased sales volumes in Latin America and increased
sales of growth promotants in North America.
Feed ingredients sales declined 4 percent from 1993 due to price
deterioration on lower U.S. sales volume.
CORPORATE MATTERS
Corporate expense decreased $1 million to $29 million in 1995. This
favorable variance reflected last year's corporate headquarters
reorganization and relocation.
Interest and other nonoperating income (expense), net declined $4
million in 1995 from 1994. This decrease related primarily to the
write-down of an investment and hedging losses.
Interest expense increased $16 million in 1995 from increased
borrowings and higher interest rates.
Mallinckrodt's effective tax rate for continuing operations was 37.5
percent in 1995, compared with 38.5 percent in 1994, excluding the
impact of the restructuring charge and statutory rate changes. See
Note 9 of the Notes for further discussion of income taxes.
FINANCIAL CONDITION
Financial resources available to the Company are expected to continue
to be adequate to support existing businesses, fund the remaining cash
expenditures of approximately $139 million for the restructuring
programs and fund new opportunities. Since June 30, 1994, cash and
cash equivalents decreased $26 million. Operations provided
$285 million of cash, while acquisition and capital spending totaled
$272 million, $91 million of which related to the acquisition of J.T.
Baker Inc. and $8 million related to the acquisition of Alton Dean,
Inc. The Company's current ratio at June 30, 1995, was 1.4:1. Total
debt as a percentage of invested capital was 37 percent.
The Company's Board of Directors previously authorized repurchase of a
total of 42 million shares of its common stock. Twenty-nine million
shares have been purchased under this authorization, .5 million during
the year ended June 30, 1995.
On April 8, 1992, a shelf registration statement was filed with the
Securities and Exchange Commission (SEC) for $250 million of debt
securities. As of June 30, 1995, $50 million of securities under the
shelf remain unissued. On February 15, 1995, a shelf registration
statement was filed with the SEC for $250 million of debt securities,
all on terms to be determined at the time of the actual offerings for
sale. No offerings have occurred. Net proceeds from the sale of any
debt securities would be used for general corporate purposes, except
as noted in any prospectus supplement.
The Company has a $450 million private-placement commercial paper
program. This program is backed by $650 million of U.S. lines of
credit, $100 million available until March 1996 and $550 million
available until November 1999. At June 30, 1995, commercial paper
borrowings and borrowings under the U.S. credit lines amounted to $153
million and $90 million, respectively. At June 30, 1995, non-U.S.
lines of credit totaling $263 million were also available and
borrowings under these lines were $36 million. The non-U.S. lines can
be cancelled at any time.
Estimated capital spending for the fiscal year ending June 30, 1996,
is approximately $200 million.
OTHER MATTERS
The Company does not consider the present rate of inflation to have a
significant impact on the businesses in which it operates except for
the hyperinflationary effects on the Latin American businesses of
Mallinckrodt Veterinary which are reported in Note 17 of the Notes.
See Note 20 of the Notes for a discussion of environmental matters.
<PAGE>
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Report of Independent Auditors . . . . . . . . . . . . . . . 9
Information by Business Segment. . . . . . . . . . . . . . . 10
Consolidated Statement of Operations . . . . . . . . . . . . 11
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . 12
Consolidated Statement of Cash Flows . . . . . . . . . . . . 13
Consolidated Statement of Changes in Shareholders' Equity. . 14
Notes to Consolidated Financial Statements . . . . . . . . . 15
Quarterly Results. . . . . . . . . . . . . . . . . . . . . . 29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Mallinckrodt Group Inc.
We have audited the accompanying consolidated balance sheet of
Mallinckrodt Group Inc. as of June 30, 1995 and 1994, and the related
consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the three years in the period ended
June 30, 1995, appearing on pages 10 through 28. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Mallinckrodt Group Inc. at June 30, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended June 30, 1995, in conformity with
generally accepted accounting principles.
As discussed in Significant Accounting Policies to the consolidated
financial statements, in 1993 the Company changed its method of
accounting for income taxes and employee benefits.
Ernst & Young LLP
St. Louis, Missouri
August 8, 1995
<PAGE>
<TABLE>
INFORMATION BY BUSINESS SEGMENT
NET SALES
(In millions)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Mallinckrodt Chemical. . . . . . . . . . . . . . $ 576.8 $ 436.9 $ 395.3
Mallinckrodt Medical . . . . . . . . . . . . . . 1,011.8 912.3 783.1
Mallinckrodt Veterinary. . . . . . . . . . . . . 623.8 591.7 618.1
Intersegment sales . . . . . . . . . . . . . . . (.3) (.8) (.2)
--------- --------- ---------
Consolidated . . . . . . . . . . . . . . . . . $2,212.1 $1,940.1 $1,796.3
</TABLE>
<TABLE>
EARNINGS AND ASSETS
(In millions)
<CAPTION>
Earnings (Loss) from
Continuing Operations
Before Income Taxes Identifiable Assets
------------------------- --------------------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Mallinckrodt Chemical..$ 68.5 $ 61.7 $ (5.4) $ 800.4 $ 595.1 $ 468.2
Mallinckrodt Medical... 228.2 128.9 174.4 1,185.0 1,102.4 906.5
Mallinckrodt Veterinary 61.0 32.6 (242.5) 745.5 709.5 698.0
Corporate.............. (28.8) (30.2) (35.5) 113.3 143.4 188.3
Eliminations........... .1 (123.6) (116.9) (83.4)
------- ------- ------- --------- --------- ---------
Operating earnings
(loss)............... 328.9 193.1 (109.0)
Equity in pre-tax
earnings of joint
venture.............. 25.3 18.5 10.6
Interest and other
nonoperating income
(expense), net....... (4.2) (.4) 2.6
Interest expense....... (55.4) (39.8) (37.3)
------- ------- ------- --------- --------- ---------
Consolidated...........$294.6 $171.4 $(133.1) $2,720.6 $2,433.5 $2,177.6
====== ====== ======== ======== ======== ========
</TABLE>
<TABLE>
PROPERTY, PLANT AND EQUIPMENT
(In millions)
<CAPTION>
Capital Expenditures Depreciation and Amortization
------------------------ -------------------------------
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Mallinckrodt Chemical..$ 41.8 $ 41.6 $ 46.2 $ 36.7 $ 26.4 $ 28.0
Mallinckrodt Medical... 85.2 99.4 95.0 58.7 47.8 37.1
Mallinckrodt Veterinary 31.2 28.1 45.9 28.0 27.9 28.8
Corporate.............. 2.6 3.2 1.2 1.6 2.5 2.2
------ ------ ------ ------ ------ ------
Consolidated.........$160.8 $172.3 $188.3 $125.0 $104.6 $ 96.1
====== ====== ====== ====== ======
</TABLE>
(See Note 18 of the Notes to Consolidated Financial Statements.)
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions except per share amounts)
<CAPTION>
Years Ended June 30,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales.........................................$2,212.1 $1,940.1 $1,796.3
Operating costs and expenses:
Cost of goods sold.............................. 1,215.2 1,037.3 970.6
Selling, administrative and general expenses.... 577.3 522.0 511.2
Research and development expenses............... 97.8 95.3 95.3
Restructuring charge............................ 93.9 334.1
Other operating income, net..................... (7.1) (1.5) (5.9)
--------- --------- ---------
Total operating costs and expenses................ 1,883.2 1,747.0 1,905.3
--------- --------- ---------
Operating earnings (loss)....................... 328.9 193.1 (109.0)
Equity in pre-tax earnings of joint venture....... 25.3 18.5 10.6
Interest and other nonoperating income (expense),
net............................................. (4.2) (.4) 2.6
Interest expense.................................. (55.4) (39.8) (37.3)
--------- --------- ---------
Earnings (loss) from continuing operations
before income taxes........................... 294.6 171.4 (133.1)
Income tax provision (benefit).................... 110.5 64.0 (19.3)
--------- --------- ---------
Earnings (loss) from continuing operations...... 184.1 107.4 (113.8)
Loss from discontinued operations................. (3.8) (3.6) (6.0)
--------- --------- ---------
Earnings (loss) before cumulative effect
of accounting change.......................... 180.3 103.8 (119.8)
Cumulative effect of accounting changes........... (80.6)
--------- --------- ---------
Net earnings (loss)............................. 180.3 103.8 (200.4)
Preferred stock dividends......................... (.4) (.4) (.4)
--------- --------- ---------
Available for common shareholders...............$ 179.9 $ 103.4 $ (200.8)
========= ========= =========
(/TABLE)
</TABLE>
<TABLE>
<CAPTION>
EARNINGS (LOSS) PER COMMON SHARE
<S> <C> <C <C>
Continuing operations............................. $2.37 $1.38 $(1.48)
Discontinued operations........................... (.05) (.05) (.08)
------ ------ -------
Earnings (loss) before cumulative effect of
accounting changes.............................. 2.32 1.33 (1.56)
Cumulative effect of accounting changes........... (1.04)
------ ------ -------
Net earnings (loss)............................... $2.32 $1.33 $(2.60)
====== ====== =======
</TABLE>
(The accompanying Notes are an integral part of the Consolidated
Financial Statements.)
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
(In millions except share and per share amounts)
<CAPTION>
At June 30,
------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................$ 61.7 $ 87.9
Trade receivables, less allowances of $13.5 in 1995 and
$11.1 in 1994........................................... 414.5 343.6
Inventories............................................... 433.8 376.9
Deferred income taxes..................................... 53.1 77.6
Other current assets...................................... 57.0 46.0
-------- --------
Total current assets........................................ 1,020.1 932.0
Investments and long-term receivables, less allowances
of $17.0 in 1995 and $13.1 in 1994........................ 165.5 147.0
Property, plant and equipment, net.......................... 1,005.6 863.2
Intangible assets........................................... 528.7 489.3
Deferred income taxes....................................... .7 2.0
-------- --------
Total assets................................................$2,720.6 $2,433.5
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt...........................................$ 197.5 $ 147.8
Accounts payable.......................................... 191.0 139.4
Accrued liabilities....................................... 349.4 356.0
Income taxes payable...................................... 7.7 25.4
Deferred income taxes..................................... 2.7 2.1
-------- --------
Total current liabilities................................... 748.3 670.7
Long-term debt, less current maturities..................... 501.5 522.0
Deferred income taxes....................................... 76.8 36.6
Postretirement benefits..................................... 142.7 124.7
Other noncurrent liabilities and deferred credits........... 79.8 63.6
-------- --------
Total liabilities........................................... 1,549.1 1,417.6
-------- --------
Shareholders' equity:
4 Percent cumulative preferred stock...................... 11.0 11.0
Common stock, par value $1, authorized 300,000,000
shares; issued 87,116,289 shares in 1995 and 1994....... 87.1 87.1
Capital in excess of par value............................ 274.1 268.2
Reinvested earnings....................................... 984.5 846.4
Foreign currency translation.............................. (9.3) (34.2)
Treasury stock, at cost................................... (175.9) (162.6)
-------- ---------
Total shareholders' equity.................................. 1,171.5 1,015.9
-------- ---------
Total liabilities and shareholders' equity.................. $2,720.6 $2,433.5
======== ========
</TABLE>
(The accompanying Notes are an integral part of the Consolidated
Financial Statements.)
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Years ended June 30,
---------------------------
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net earnings (loss)............................... $180.3 $103.8 $(200.4)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization................... 125.0 104.6 96.1
Restructuring charge............................ 93.0 312.6
Cumulative effect of accounting changes......... 80.6
Postretirement benefits......................... 12.1 8.3 7.1
Undistributed equity in earnings of joint venture (19.1) (14.4) (7.7)
Deferred income taxes........................... 66.6 (5.2) (60.6)
Other, net...................................... (4.0) (7.6) (53.1)
------- ------- --------
360.9 282.5 174.6
Changes in noncash operating working capital:
Accounts receivable........................... (44.1) (12.6) 9.7
Inventories................................... (16.3) (11.4) (11.1)
Accounts payable, accrued liabilities and
income taxes, net........................... (12.8) (32.1) (37.6)
Other, net.................................... (3.2) .9 1.0
------- ------- --------
Net cash provided by operating activities......... 284.5 227.3 136.6
------- ------- --------
CASH FLOWS - INVESTING ACTIVITIES
Capital expenditures.............................. (160.8) (172.3) (188.3)
Acquisition spending.............................. (111.5) (95.5) (201.2)
IFL dividend receivable........................... 51.9
Proceeds from asset disposals..................... 21.2 8.6 19.9
Other, net........................................ (22.8) 7.2 (15.6)
------- ------- --------
Net cash used by investing activities............. (273.9) (200.1) (385.2)
------- ------- --------
CASH FLOWS - FINANCING ACTIVITIES
Increase (decrease) in short-term debt............ 19.9 (58.6) 71.4
Proceeds from long-term debt...................... 3.2 196.4 193.3
Payments on long-term debt........................ (10.3) (101.6) (11.1)
Issuance of Mallinckrodt common stock............. 8.0 10.9 17.9
Acquisition of treasury stock..................... (15.4) (6.5)
Dividends paid.................................... (42.2) (37.7) (33.2)
------- ------- --------
Net cash provided (used) by financing activities.. (36.8) 9.4 231.8
------- ------- --------
Increase (decrease) in cash and cash equivalents.. (26.2) 36.6 (16.8)
Cash and cash equivalents at beginning of period.. 87.9 51.3 68.1
------- ------- ---------
Cash and cash equivalents at end of period........ $ 61.7 $ 87.9 $ 51.3
======= ======= =========
</TABLE>
(The accompanying Notes are an integral part of the Consolidated
Financial Statements.)
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions except per share amounts)
<CAPTION>
Capital in
Preferred Common Excess of Reinvested Treasury
Stock Stock Par Value Earnings Other Stock
--------- ------- ---------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1992.. $ 11.0 $ 87.1 $ 253.1 $1,013.9 $ 37.3 $(178.2)
Net loss................ (200.4)
Dividends:
4 Percent cumulative
preferred stock
($4.00 a share)..... (.4)
Common stock ($.43 a
share)................ (32.8)
Stock option exercises.. 7.1 10.8
Acquisition of treasury
stock................. (6.5)
Translation adjustment.. (95.9)
Other................... 2.2 2.2
------ ------ ------- -------- ------- -------
BALANCE, JUNE 30, 1993.. 11.0 87.1 262.4 780.3 (58.6) (171.7)
Net earnings............ 103.8
Dividends:
4 Percent cumulative
preferred stock
($4.00 a share)..... (.4)
Common stock ($.485 a
share).............. (37.3)
Stock option exercises.. 4.0 6.9
Translation adjustment.. 24.4
Other................... 1.8 2.2
------ ------ ------- -------- ------- -------
BALANCE, JUNE 30, 1994.. 11.0 87.1 268.2 846.4 (34.2) (162.6)
Net earnings............ 180.3
Dividends:
4 Percent cumulative
preferred stock
($4.00 a share).... (.4)
Common stock ($.545 a
share)............... (41.8)
Stock option exercises. 2.0 6.2
Acquisition of treasury
stock................ (15.4)
Translation adjustment. 24.9
Other............. 3.9 (4.1)
------ ------ ------- -------- ------- -------
BALANCE, JUNE 30, 1995. $ 11.0 $ 87.1 $ 274.1 $ 984.5 $ (9.3) $(175.9)
====== ====== ======= ======== ======= ========
</TABLE>
(The accompanying Notes are an integral part of the Consolidated
Financial Statements.)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions except per share amounts)
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Financial statements of all majority owned subsidiaries are
consolidated. Investments in 20 to 50 percent owned affiliates are
reported on the equity method.
Accounting Changes
In the fourth quarter of 1993, Mallinckrodt adopted Statements of
Financial Accounting Standards (FAS) No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions," FAS No. 109
"Accounting for Income Taxes" and FAS No. 112 "Employers' Accounting
for Postemployment Benefits," all retroactive to July 1, 1992. The
cumulative effects of these accounting changes at July 1, 1992
pertaining to years prior to 1993 follow:
Amount Per Share
------ ---------
FAS No. 106 $63.0 $ .81
FAS No. 109 16.5 .21
FAS No. 112 1.1 .02
----- ------
Total $80.6 $1.04
===== ======
Foreign Currency Translation
The financial statements of most of the Company's international
affiliates are translated into U.S. dollars using current exchange
rates for balance sheets and weighted average rates for income
statements. Unrealized translation adjustments are included in
shareholders' equity in the Consolidated Balance Sheet.
The financial statements of international affiliates that operate in
hyperinflationary economies, principally Brazil, are translated at
either current or historical exchange rates, as appropriate.
Unrealized translation adjustments are included in operating results
for these affiliates.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of certificates of
deposit, time deposits and other short-term securities with maturities
of three months or less from the date of purchase.
Inventories
Inventories are valued at the lower of cost or market. Cost for
inventories is determined on either an average or first-in, first-out
basis.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is
based upon estimated useful lives of 15 to 45 years for buildings and
4 to 15 years for machinery and equipment, using principally the
straight-line method.
Derivative Financial Instruments
The Company hedges a significant portion of its foreign exchange
exposure using certain derivative financial instruments, primarily
forward contracts, currency swaps and purchased options. Forward
contracts and currency swaps are carried off-balance-sheet with gains
and losses included in the measurement and recording of the
hedged transactions. Premiums on purchased options are recorded as
assets and amortized to match the anticipated cash flows being hedged.
See also Note 8.
Advertising Costs
All advertising costs are expensed as incurred and included in
selling, general and administrative expenses. Advertising expense was
$41.2 million, $35.1 million and $41.7 million in 1995, 1994 and 1993,
respectively.
Reclassifications
Certain amounts in prior years have been reclassified to conform to
the current year presentation.
NOTE 1: CHANGES IN BUSINESS
RESTRUCTURING PROGRAMS
In the fourth quarter of 1994, the Company recorded a restructuring
charge of $93.9 million, $58.8 million after taxes, or $.76 per share,
relating to Mallinckrodt Medical and Mallinckrodt Veterinary.
Restructuring actions related to the program are on track and
achieving anticipated results at June 30, 1995. The Mallinckrodt
Medical pre-tax restructuring charge of $73.9 million included the
reorganization of the current medical specialty oriented U.S. sales
structure into a unified organization divided into geographical
districts; reorganization to reduce, centralize and standardize
certain non-sales related functions and management processes;
rationalization of manufacturing operations for substantial worldwide
cost and sourcing improvements; and severance costs related to an
associated workforce reduction. Pre-tax cash expenditures for this
restructuring are expected to approximate the original estimate of $65
million, consisting of $28 million for severance costs for about 500
people at various locations around the world, $15 million for
consulting, $13 million for manufacturing rationalization and $9
million for other items. The $9 million noncash pre-tax portion of the
charge primarily related to manufacturing rationalization.
Approximately $26 million of cash expenditures were incurred through
June 30, 1995, the majority of which related to severance associated
with a workforce reduction of approximately 500 people and consulting
costs. The majority of the remaining cash expenditures of $39 million
will be paid in 1996 and relate to severance for terminated employees
and consulting costs. Based on the expenditures to date and those
anticipated by the original plan, no significant adjustment to the
reserve balance is expected at this time. Also included in the
restructuring charge was a $20 million pre-tax charge to adjust
a prior year provision associated with Mallinckrodt Veterinary's
decision to discontinue development of porcine somatotropin (PST) in
May 1993.
In the fourth quarter of 1993, the Company recorded a restructuring
charge of $334.1 million, $242.2 million after taxes, or $3.13 per
share relating to Mallinckrodt Veterinary and Mallinckrodt Chemical.
Restructuring actions related to the program are substantially
complete at June 30, 1995. Pre-tax cash expenditures for
restructuring charges are expected to approximate the original
estimate of $173 million and are primarily related to severance costs
of $54 million, lease costs related to a closed facility of $55
million, consulting costs of $15 million, and manufacturing
rationalization and other costs of $49 million. The $161 million
noncash portion of the charges primarily related to the write-off of
plant facilities. Approximately $73 million of the cash expenditures
were incurred through June 30, 1995, the majority of which related to
severance for a workforce reduction of approximately 1,000 people and
consulting costs. The majority of the remaining cash expenditures of
approximately $100 million relate to manufacturing rationalization to
be paid in 1996 and the present value of long-term lease payments.
Based on the expenditures to date and those anticipated by the
original plan, no significant adjustment to the reserve balance is
expected at this time.
The Mallinckrodt Veterinary 1993 pre-tax restructuring charge of
$282.8 million included the discontinuance of the development of PST,
including manufacturing and support facilities; closure and
consolidation of manufacturing and other distribution and support
facilities; redefinition and reorganization of research and
development, commercial and administrative functions; exit of certain
animal health businesses; and severance costs related to a workforce
reduction of approximately 1,000 employees.
As part of the 1993 program, Mallinckrodt Chemical also recorded a
pre-tax charge of $51.3 million, primarily to close its aromatic
fluorine intermediates business and to sell its photochemical
business. The restructuring charge included approximately
$40 million for write-down of carrying value of plant facilities and
$11 million of cash expenditures.
ACQUISITIONS
In June 1995, Mallinckrodt Medical acquired Alton Dean, Inc., a
manufacturer of products that warm sterile intravenous and irrigation
solutions used during and after surgery for $8.5 million.
In February 1995, Mallinckrodt Chemical acquired J.T. Baker Inc., a
manufacturer of laboratory, process and microelectronic chemicals for
$95.0 million.
In March 1994, Mallinckrodt Chemical acquired Catalyst Resources,
Inc., a manufacturer of polymerization and chemical catalysts for
$61.2 million, and in September 1993, Mallinckrodt Medical acquired
DAR S.p.A., a manufacturer of anesthesiology and respiratory care
products for $28.0 million.
In September 1992, Mallinckrodt Medical acquired the businesses of
HemoCue Intressenter, A.B., a manufacturer of point-of-care blood
chemistry systems, and in February 1993, the tracheostomy products
business of Sorin Biomedical, Inc. The cost of these acquisitions,
including acquisition accruals, totaled $198.0 million.
The above acquisitions were accounted for as purchases and results of
operations were included in the consolidated financial statements from
their respective acquisition dates. Results of operations for the
periods prior to acquisition were not material to Mallinckrodt.
DISCONTINUED OPERATIONS
The discontinued operations charges for 1995, 1994, and 1993 primarily
included environmental and related litigation costs related to
operations previously disposed.
NOTE 2: EARNINGS PER COMMON SHARE
Earnings per common share amounts were computed on the basis of the
weighted average number of common and common equivalent shares
outstanding. Such weighted average shares used in the computations
were 77,458,114 in 1995; 77,607,416 in 1994 and 77,408,668 in 1993.
NOTE 3: SUPPLEMENTAL CASH FLOW INFORMATION
1995 1994 1993
----- ----- -----
Interest paid..............................$47.9 $33.0 $35.8
Income taxes paid.......................... 42.5 37.8 35.1
Noncash investing and financing activities:
Assumption of liabilities related to
acquisitions........................... 42.4 27.9 25.0
Issuance of common stock for restricted
stock awards........................... 4.0 4.4
NOTE 4: INVENTORIES
AT JUNE 30, 1995 1994
------ ------
Raw materials and supplies.................$132.5 $ 99.5
Work in process............................ 102.5 93.1
Finished goods............................. 198.8 184.3
------ ------
$433.8 $376.9
====== ======
NOTE 5: INVESTMENTS AND LONG-TERM RECEIVABLES
AT JUNE 30, 1995 1994
------ ------
Tastemaker joint venture...................$ 92.3 $ 74.9
Other investments.......................... 21.6 21.4
Other long-term receivables, net........... 51.6 50.7
------ ------
$165.5 $147.0
====== ======
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
AT JUNE 30, 1995 1994
--------- ---------
Land.......................................$ 72.1 $ 69.3
Buildings and leasehold improvements....... 387.3 352.9
Machinery and equipment.................... 1,013.2 872.4
Construction in progress................... 67.9 101.4
--------- ---------
1,540.5 1,396.0
Accumulated depreciation.................. (534.9) (532.8)
--------- ---------
$1,005.6 $ 863.2
========= =========
Capitalized interest costs were $1.6 million in 1995, $3.7 million in
1994 and $6.3 million in 1993.
NOTE 7: INTANGIBLE ASSETS
AT JUNE 30, 1995 1994
------ ------
Goodwill and other intangibles.............$575.0 $518.9
Patents and technology..................... 67.0 63.7
------ ------
642.0 582.6
Accumulated amortization...................(131.6) (111.0)
------- -------
510.4 471.6
Deferred charges........................... 18.3 17.7
------- -------
$528.7 $489.3
======= =======
Identifiable intangible assets are amortized over estimated useful
lives of 8 to 25 years (weighted average life of 12 years) for patents
and technology. Goodwill and other intangibles are amortized primarily
on a straight-line basis over 10 to 40 years (weighted average life of
28 years).
NOTE 8: FINANCIAL INSTRUMENTS
Derivative Financial Instruments
--------------------------------
In the ordinary course of business, Mallinckrodt purchases materials
and sells finished products denominated in various currencies. The
Company uses certain derivative financial instruments to manage its
exposure to foreign currency exchange risk, principally forward
foreign exchange contracts, currency swaps and foreign currency
purchased options. These contracts reduce the Company's overall
exposure to exchange rate fluctuations by effectively fixing the
transaction cost to the Company.
Carrying and fair values for derivative financial instruments are
summarized below.
At June 30, 1995
----------------------
Carrying Fair
Value Value
-------- ---------
Forward foreign currency contracts and
swaps hedging short-term intercompany
and third-party financing by inter-
national operations, notional value
$151.6 million........................ $--- $ (.4)
Forward foreign currency contracts and
swaps hedging anticipated cross
currency sales and purchases, notional
value $70.5 million................... --- .5
Forward foreign currency options
hedging anticipated cross currency
sales and purchases, notional value
$97.5 million......................... --- (2.0)
Interest rate swap, pay fixed rate,
receive floating rate, notional value
$38.2 million......................... --- ---
Anticipated transactions include purchases of raw materials or other
inventory, collection of accounts receivable, settlement of accounts
payable, and periodic debt service by international subsidiaries.
Purchased options and forward foreign exchange contracts generally
have initial terms of less than two years. Deferred gains and losses
are recognized in income when the underlying transaction is settled.
Fair Value of Financial Instruments
-----------------------------------
Non-derivative financial instruments included in the Consolidated
Balance Sheet are cash, commercial paper and long-term debt. These
instruments were carried at amounts approximating fair value at June
30, 1995 and 1994. The fair value of long-term debt was estimated
based on future cash flows discounted at current interest rates
available to the Company for debt with similar maturities and
characteristics.
Concentrations of Credit Risk
-----------------------------
Financial instruments which expose Mallinckrodt to credit risk are
short-term investments (cash equivalents), trade receivables and
derivatives. The Company mitigates the risk that counterparties to
short-term investments and derivatives will fail to perform by
contracting only with major financial institutions having
high credit ratings, and considers the likelihood of counterparty
failure to be remote.
Trade receivables stem from the Company's worldwide operations and
reflect Mallinckrodt's diverse customer base. The Company
periodically assesses the financial strength of its customers and
obtains proof of credit worthiness, as necessary, prior to extending
credit. Consequently, Mallinckrodt does not have a material
concentration of credit risk, either by transaction type, product line
or geographic region.
NOTE 9: INCOME TAXES
In the first quarter of 1994, the Revenue Reconciliation Act of 1993
was signed. This Act increased the Federal statutory income tax rate
1 percent, to 35 percent, retroactive to January 1, 1993.
Additionally, in the third quarter of 1994 certain foreign (primarily
German and Swedish) tax rates decreased. The net impact of these
rate changes resulted in a non-recurring benefit of $3.0 million in
1994 related to the revaluation of deferred taxes in accordance with
FAS 109, "Accounting for Income Taxes."
Income taxes included in the Consolidated Statement of Operations
were:
1995 1994 1993
------- ------- -------
Continuing operations..................... $110.5 $ 64.0 $(19.3)
Discontinued operations................... (2.1) (2.0) (3.1)
Cumulative effect of accounting changes... (19.4)
------- ------- -------
$108.4 $ 62.0 $(41.8)
======= ======= =======
The geographical sources of earnings (loss) from continuing operations
before income taxes were:
1995 1994 1993
------- ------- -------
United States............................. $155.8 $ 87.1 $(126.2)
Outside United States..................... 138.8 84.3 (6.9)
------- ------- --------
$294.6 $171.4 $(133.1)
======= ======= ========
The components of the income tax provision (benefit) charged
(credited) to continuing operations follow.
1995 1994 1993
------- ------- -------
Current:
U.S. Federal.............................. $ 3.0 $ 37.7 $ 15.0
U.S. State and local...................... 4.2 6.5 6.5
Outside United States..................... 36.7 25.0 19.8
------- ------- -------
43.9 69.2 41.3
Deferred:
U.S. Federal.............................. 42.5 (12.7) (57.3)
U.S. State and local...................... 5.2 .8 (2.9)
Outside United States..................... 18.9 6.7 (.4)
------- ------- -------
66.6 (5.2) (60.6)
------- ------- -------
$110.5 $ 64.0 $(19.3)
======= ======= =======
The Company had the following deferred tax balances at June 30, 1995
and 1994:
1995 1994
------ ------
Deferred tax assets:
Restructuring accruals........................... $ 51.3 $ 97.9
Employee benefits................................ 71.6 57.6
Net operating losses............................. 21.8 45.5
Alternative minimum tax credit................... 8.3 10.9
Environmental accruals........................... 9.7 5.4
Other, net....................................... 6.6 4.4
------- -------
Gross deferred tax assets.......................... 169.3 221.7
Valuation allowances............................. (24.7) (49.8)
------- -------
Total deferred tax assets.......................... 144.6 171.9
Deferred tax liabilities:
Property, plant and equipment.................... 85.5 86.7
Receivables...................................... 58.2 24.1
Intangible assets................................ 26.6 20.2
------- -------
Total deferred tax liabilities..................... 170.3 131.0
------- -------
Net deferred tax (assets) liabilities.............. $ 25.7 $(40.9)
======= =======
The alternative minimum tax credit of $8.3 million is available to
reduce future Federal taxes payable and has an unlimited carryforward
period.
The tax benefit of the Company's net operating loss carryforwards of
$21.8 million relates to its non-U.S. operations. Factors causing the
effective tax rate for continuing operations to differ from the
U.S. Federal statutory rate were:
1995 1994 1993
------ ------ ------
Computed tax at the U.S. Federal statutory
rate..................................... $103.1 $ 60.0 $(45.3)
Statutory rate changes..................... (3.0)
Adjustments to income tax accruals......... (5.0)
State income taxes, net of Federal benefit. 6.1 4.7 5.8
Restructuring.............................. 21.7
Other items................................ 1.3 2.3 3.5
------- ------- -------
Income tax provision (benefit)............. $110.5 $ 64.0 $(19.3)
======= ======= =======
Effective tax rate......................... 37.5% 37.3% 14.5%
The effective rate for 1994 before the net tax benefit from the
restructuring charge and the previously discussed statutory rate
changes was 38.5 percent. The 1993 effective rate before the net
benefit for restructuring and FAS 109 adoption was 36.8 percent. The
favorable adjustments to income tax accruals included in the preceding
table resulted from the conclusion of income tax audits that spanned a
number of years.
Undistributed earnings of certain subsidiaries outside the United
States are considered to be permanently invested. Accordingly, no
provision for income taxes was made for undistributed earnings of such
subsidiaries which aggregated $188.4 million at June 30, 1995.
NOTE 10: ACCRUED LIABILITIES
AT JUNE 30, 1995 1994
------- -------
Restructuring accruals..................... $139.0 $176.1
Other...................................... 210.4 179.9
------ ------
$349.4 $356.0
====== ======
NOTE 11: DEBT
The components of short-term debt were:
AT JUNE 30, 1995 1994
------ ------
Commercial paper........................... $ 53.3 $ 72.5
Notes payable.............................. 125.7 55.0
Current maturities of long-term debt....... 18.5 20.3
------ ------
$197.5 $147.8
====== ======
The components of long-term debt were:
AT JUNE 30, 1995 1994
------ ------
Commercial paper........................... $100.0 $100.0
9.875% debentures due in annual
installments of $15.0 million, beginning
in 2002, with final payment of $12.8
million in 2011.......................... 134.8 134.6
8.75% promissory note due in annual
installments of $10.3 million, with final
payment of $.5 million in 1997........... 10.8 31.3
7% debentures due 2013..................... 98.5 98.5
6% notes due 2003.......................... 99.3 99.2
Other...................................... 76.6 78.7
------ ------
520.0 542.3
Less current maturities.................... 18.5 20.3
------ ------
$501.5 $522.0
At June 30, 1995 and 1994, commercial paper totaling $100.0 million,
has been classified as long-term debt as it is backed by irrevocable
long-term lines of credit.
The 9.875% debentures are redeemable at the option of Mallinckrodt at
100 percent in 2001 and thereafter.
Maturities of long-term debt for the next five years are: 1996-$18.5
million; 1997-$6.6 million; 1998-$4.4 million; 1999-$34.7 million; and
2000-$103.6 million (includes $100.0 million of commercial paper).
The weighted average interest rate on short-term borrowings at June
30, 1995 and 1994 was 6.3% and 4.6%, respectively.
NOTE 12: LINES OF CREDIT
The Company has a $450 million private-placement commercial paper
program. This program is backed by $650 million of U.S. lines of
credit, $100 million available until March 1996 and $550 million
available until November 1999. Under the terms of this agreement,
interest rates are determined at the time of borrowing and are
dependent on the Company's senior debt ratings and usage level of the
facility. At current usage level and senior debt ratings, the
borrowing cost would be based on London Interbank Offered Rates plus
.14 percent, or other alternative rates.
Commercial paper and borrowings under the U.S. credit lines of $153.3
million and $90 million, respectively, were outstanding at June 30,
1995. Non-U.S. lines of credit totaling $262.6 million are also
available and borrowings under these lines were $35.7 million at June
30, 1995. These non-U.S. lines are cancelable at any time.
NOTE 13: PENSION AND INVESTMENT PLANS
The Company has pension plans covering substantially all its employees
that provide for retirement benefits based on years of service and the
level of compensation for the highest three to five years occurring
generally within a period of up to 10 years prior to retirement.
Contributions to the U.S. plans meet ERISA minimum funding
requirements.
Pension expense for continuing operations follows:
1995 1994 1993
------ ------ ------
Service cost............................... $18.9 $18.1 $15.6
Interest cost on projected benefit
obligation............................... 31.7 30.8 29.9
Earnings on plan assets.................... (24.0) (21.2) (35.0)
Net amortization of initial unrecognized
asset and deferral of subsequent
unrecognized net gains and losses........ (5.7) (7.5) 9.3
------ ------ ------
$20.9 $20.2 $19.8
====== ====== ======
U.S. pension expense in 1995, 1994 and 1993 was $17.9 million, $16.2
million and $15.7 million, respectively.
Assumptions used in determining the actuarial present value of benefit
obligations follow:
1995 1994 1993
------ ------ ------
Discount rate.............................. 8.5% 8.0% 8.5%
Long-term rate of return on plan assets.... 9.5% 10.0% 10.0%
Compensation increase rate................. 5.5% 5.5% 6.0%
The plans' assets mostly relate to U.S. plans and consist primarily of
corporate equities, U.S. government debt securities and units of
participation in a collective short-term investment fund.
The Company also sponsors three defined contribution investment plans.
Participation in these plans is voluntary, with substantially all
employees eligible to participate. Expenses related to the plans
consist primarily of Company contributions which are based on
percentages of certain employee contributions, plus discretionary
amounts determined on an annual basis. Defined contribution expense
for 1995, 1994 and 1993 was $12.4 million, $10.6 million and $7.5
million, respectively.
The funded status of Mallinckrodt's U.S. and non-U.S. pension plans
and amounts recognized in the balance sheet follow:
<TABLE>
<CAPTION>
1995 1994
------------------------ -------------------------
Plans With Plans With Plans With Plans With
Assets In Accumulated Assets In Accumulated
Excess of Benefits Excess of Benefits
Accumulated In Excess Accumulated In Excess
Benefits of Assets Benefits of Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets at fair value....... $307.2 $ 48.8 $292.0 $ 41.2
Actuarial present value of
benefit obligation:
Vested benefits........ 254.6 61.0 242.8 56.7
Nonvested benefits..... 4.8 6.7 5.5 6.5
------ ------ ------ ------
Accumulated benefit
obligation........... 259.4 67.7 248.3 63.2
Projected future
salary increases..... 69.8 19.4 67.6 23.4
------ ------ ------ ------
Projected benefit
obligation........... 329.2 87.1 315.9 86.6
------ ------ ------ ------
Projected benefit obligation
in excess of plan assets.. (22.0) (38.3) (23.9) (45.4)
Items not yet recognized in
earnings:
Unrecognized net (gain)
loss.................. 23.1 (2.3) 28.2 7.9
Unamortized transition
(asset) liability..... (2.6) 10.8 (2.4) 12.7
------- ------- ------- -------
Prepaid (accrued) pension
liability................. $ (1.5) $(29.8) $ 1.9 $(24.8)
======= ======= ======= =======
</TABLE>
NOTE 14: POST RETIREMENT AND POSTEMPLOYMENT BENEFITS
Mallinckrodt provides certain health care benefits for U.S. salaried
and hourly retired employees. Employees may become eligible for health
care benefits if they retire after attaining specified age and service
requirements while they worked for the Company. Health care benefits
are paid directly by Mallinckrodt.
Net periodic postretirement benefits expense for 1995, 1994 and 1993
consisted of the following:
1995 1994 1993
------ ------ ------
Service cost for benefits earned during the
year..................................... $ 4.9 $ 3.6 $ 3.8
Interest cost on benefit obligation........ 13.0 10.4 10.7
Amortization of unrecognized net loss...... .6
----- ----- -----
$18.5 $14.0 $14.5
===== ===== =====
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's statement of financial position:
1995 1994
------ ------
Accumulated postretirement benefit obligation (APBO):
Retirees........................................... $90.3 $91.2
Active employees................................... 62.8 60.0
Accumulated postretirement benefit obligation in
excess of plan assets............................. 153.1 151.2
Unrecognized net loss............................... (10.4) (26.5)
------ ------
Accrued postretirement benefit cost................. $142.7 $124.7
====== ======
The discount rate used in determining the APBO at June 30, 1995 and
1994 was 8.5 percent and 8.0 percent, respectively.
The assumed health care cost trend rate used in measuring the APBO at
June 30, 1995 was 10.0 percent, gradually declining to 5.0 percent in
2006 and thereafter. At June 30, 1994 the rate was 10.5 percent
gradually declining to 5.0 percent in 2005 and thereafter. A one
percentage point increase in the health care cost trend rate would
increase the APBO as of June 30, 1995, by $17.8 million and the
aggregate service and interest cost by $2.5 million.
NOTE 15: CAPITAL STOCK
The Company has authorized and issued 100,000 shares, 98,330
outstanding at June 30, 1995, par value $100, 4 Percent cumulative
preferred stock. This stock, with voting rights, is redeemable at the
Company's option at $110 a share. During the three years ended June
30, 1995, the number of issued and outstanding shares did not change.
At June 30, 1995, the Company has authorized 1,400,000 shares, par
value $1, of series preferred stock, none of which is outstanding.
Each outstanding common share includes a non-voting common stock
purchase right. If a person or group acquires or has the right to
acquire 20 percent or more of the common stock or commences a tender
offer for 30 percent or more of the common stock, the rights become
exercisable by the holder who may then purchase $167 worth of
common stock for $83 unless, in lieu thereof, the Board of Directors
causes the exchange of each outstanding right for one share of common
stock (in either case exclusive of the rights held by the acquiring
person or group which are voided). In the event of a merger or sale of
50 percent or more of the Company's assets, the rights may in certain
circumstances entitle the holder to purchase $167 worth of stock in
the surviving entity for $83. The rights may be redeemed by the Board
at a price of $.017 per right at any time before they become
exercisable, and unless they become exercisable, they will expire
March 31, 1996.
The Company has a three year incentive award program for executive
officers which expires June 30, 1997. There are 1,000,000 common
shares reserved for issuance under this plan.
Common shares reserved at June 30, 1995, consisted of the following:
Exercise of common stock purchase rights................ 87,711,353
Exercise of stock options and granting of stock awards.. 10,960,267
----------
98,671,620
Changes in the number of shares of common stock issued
and in treasury were as follows:
1995 1994 1993
----------- ----------- ----------
Common stock issued.............. 87,116,289 87,116,289 87,116,289
Treasury common stock:
Balance, beginning of year..... 10,110,056 10,671,514 11,371,742
Stock options exercised........ (371,913) (429,645) (833,560)
Purchased...................... 499,854 19 274,267
(Awards) cancellations of
restricted shares............ 127,206 (131,832) (140,935)
----------- ----------- -----------
Balance, end of year........... 10,365,203 10,110,056 10,671,514
----------- ----------- -----------
Common stock outstanding, end of
year........................... 76,751,086 77,006,233 76,444,775
========== ========== ==========
NOTE 16: STOCK PLANS
Three non-qualified stock option plans provide for granting options to
purchase shares of common stock at prices not less than 100 percent of
market price (as defined) at the date of grant. Options under these
plans are exercisable over nine years beginning one year after the
date of grant and are limited to 50 percent during the first year of
eligibility.
Information on stock option activity follows:
Price
Range 1995 1994
------ --------- ---------
NUMBER OF OPTIONS
Outstanding, beginning of year...... $10-40 5,351,732 4,883,358
Granted............................. 30-34 1,419,656 1,363,680
Cancelled........................... 16-40 (272,826) (465,661)
Exercised........................... 10-37 (371,913) (429,645)
---------- ----------
Outstanding, end of year............ 10-40 6,126,649 5,351,732
========= =========
AT JUNE 30,
Exercisable.............................. 4,214,583 3,478,030
Reserved for future option grants........ 3,833,618 4,980,448
The average exercise price of outstanding stock options at June 30,
1995, was $30.14 a share, based on an aggregate exercise price of
about $185 million. Outstanding stock options will expire over a
period ending no later than April 17, 2005.
The 1973 non-qualified stock option and award plan also provides for
the award of restricted shares of Mallinckrodt's common stock to
executive officers. Under provisions of the plan, the grantee makes no
cash payment for the award and the shares are held in escrow until
vested, with the grantee being unable to dispose of the restricted
shares until vested. Upon forfeiture of any share of restricted stock
in accordance with the stock option and award plan, or the terms and
conditions of the award, the shares would automatically be transferred
to and reacquired by the Company at no cost. In 1995 and 1994, the
Company issued from its treasury stock 109 and 131,832 restricted
shares, respectively. In 1995, the Company reacquired 127,315 shares
of unrestricted stock in lieu of payment of withholding taxes on the
424,215 shares of restricted stock previously awarded to executive
officers in connection with a three year incentive award program which
expired and vested on June 30, 1994. An additional award of 5,000
shares of restricted stock will vest on April 3, 1996.
NOTE 17: INTERNATIONAL OPERATIONS
Net sales, earnings from continuing operations before income taxes,
and identifiable assets by geographic areas follow:
1995 United Asia/ Latin
---- States Europe Pacific America Canada Total
-------- ------ ------- ------- ------ ---------
Gross Sales $1,519.1 $588.1 $187.4 $118.1 $101.8 $2,514.5
Intercompany 135.6 111.6 5.2 4.0 46.0 302.4
-------- ------ ------ ------ ------ --------
Net Sales $1,383.5 $476.5 $182.2 $114.1 $ 55.8 $2,212.1
======== ====== ====== ====== ====== ========
1994 United Asia/ Latin
---- States Europe Pacific America Canada Total
-------- ------ ------- ------- ------ --------
Gross Sales $1,353.3 $453.7 $163.7 $119.1 $84.3 $2,174.1
Intercompany 130.0 68.9 3.3 2.1 29.7 234.0
-------- ------ ------ ------- ----- --------
Net Sales $1,223.3 $384.8 $160.4 $117.0 $54.6 $1,940.1
======== ====== ====== ======= ===== ========
1993 United Asia/ Latin
---- States Europe Pacific America Canada Total
-------- ------ ------- ------- ------ --------
Gross Sales $1,240.9 $395.0 $167.8 $113.0 $72.4 $1,989.1
Intercompany 119.9 41.7 6.4 .6 24.2 192.8
-------- ------ ------ ------ ----- --------
Net Sales $1,121.0 $353.3 $161.4 $112.4 $48.2 $1,796.3
======== ====== ====== ====== ===== ========
EARNINGS 1995 1994 1993
------ ------ ------
United States............................. $208.8 $220.0 $ 181.9
Europe.................................... 116.2 67.3 56.5
Asia/Pacific.............................. 12.0 14.6 16.4
Latin America............................. 23.2 17.8 16.0
Canada.................................... 5.0 4.0 (.4)
Restructuring charge...................... (93.9) (334.1)
Corporate................................. (28.8) (30.2) (35.5)
Eliminations.............................. (7.5) (6.5) (9.8)
------- ------- --------
Operating earnings........................ 328.9 193.1 (109.0)
Equity in pre-tax earnings of joint
venture................................. 25.3 18.5 10.6
Interest expense, net..................... (59.6) (40.2) (34.7)
------- ------- --------
Consolidated.............................. $294.6 $171.4 $(133.1)
======= ======= ========
ASSETS 1995 1994 1993
-------- -------- --------
United States......................... $1,570.9 $1,385.6 $1,211.5
Europe................................ 800.0 736.4 601.5
Asia/Pacific.......................... 228.7 171.6 155.3
Latin America......................... 84.3 80.5 78.4
Canada................................ 47.0 32.9 26.0
Corporate............................. 113.3 143.4 188.3
Eliminations.......................... (123.6) (116.9) (83.4)
--------- -------- --------
Consolidated.......................... $2,720.6 $2,433.5 $2,177.6
========= ======== ========
RESTRUCTURING CHARGES BY REGION WERE: 1994 1993
----- ------
United States..................................... $93.9 $257.9
Europe............................................ 35.4
Asia/Pacific...................................... 33.0
Latin America..................................... 7.8
----- ------
$93.9 $334.1
===== ======
Transfers of product between geographic areas are at prices
approximating those charged to unaffiliated customers. All such
transfers are fully eliminated.
Net foreign exchange translation gains (losses) from businesses in
hyperinflationary economies aggregated $.7 million, $(4.2) million and
$(5.8) million in 1995, 1994 and 1993, respectively, and have been
included in "Other operating income (expense), net" in the
Consolidated Statement of Operations. These translation effects were
primarily from Mallinckrodt Veterinary operations in Latin America.
Translation effects for all of Mallinckrodt's businesses were not
material.
NOTE 18: BUSINESS SEGMENTS
The tables on page 27 show Mallinckrodt's continuing worldwide
operations, which are organized in three industry segments as follows:
MALLINCKRODT CHEMICAL
Production and sale of analgesics and medicinal narcotics used by
pharmaceutical companies and catalysts, specialty inorganics,
stearates and laboratory chemicals used by industry and research
organizations. Through the Tastemaker joint venture, the company also
participates in the worldwide flavors business.
MALLINCKRODT MEDICAL
Production and sale of products used primarily in hospitals, including
X-ray contrast media, interventional products, diagnostic and
therapeutic radiopharmaceuticals, airway management products,
temperature monitoring products, and blood gas and vital sign
monitoring systems.
MALLINCKRODT VETERINARY
Production and sale of pharmaceuticals, biologicals, veterinary
specialties, other health-related products and mineral feed
supplements for food and companion animals.
NONRECURRING CHARGES
Restructuring charges recorded in 1994 and 1993 are discussed
in Note 1.
In 1993, corporate expense included charges of $5.5 million, $3.4
million after taxes, or $.04 per share, from executive resignations
resulting from the performance of Mallinckrodt Veterinary which were
reported in the Consolidated Statement of Operations under "Selling,
administrative and general expenses."
NOTE 19: COMMITMENTS
The Company leases office space, data processing equipment, buildings,
and machinery and equipment. Rent expense for continuing operations in
1995, 1994 and 1993 related to operating leases was $27.9 million,
$32.1 million and $29.6 million, respectively.
Minimum rent commitments for continuing operations at June 30, 1995,
under operating leases with a remaining noncancelable period exceeding
one year follow:
YEARS ENDING JUNE 30,
1996....................................................$ 31.9
1997.................................................... 24.0
1998.................................................... 18.3
1999.................................................... 15.6
2000.................................................... 13.6
Later years............................................. 40.5
------
$143.9
======
NOTE 20: CONTINGENCIES
The Company is subject to various investigations, claims and legal
proceedings covering a wide range of matters that arise in the
ordinary course of its business activities. In addition, in connection
with laws and regulations pertaining to the protection of the
environment, the Company is a party to several environmental
remediation investigations and clean-ups and, along with other
companies, has been named a "potentially responsible party" for
certain waste disposal sites. Each of these matters is subject to
various uncertainties, and it is possible that some of these matters
will be decided unfavorably against the Company. The Company has
established accruals for matters that are in its view probable and
reasonably estimable. Based on information presently available,
management believes that existing accruals are sufficient to satisfy
any known environmental liabilities. Further, any additional
liability that may ultimately result from the resolution of these
matters is not expected to have a material effect on Mallinckrodt's
business or financial condition taken as a whole.
<PAGE>
QUARTERLY RESULTS
(In millions except per share amounts)
<TABLE>
<CAPTION>
Fiscal 1995 (Unaudited)
Quarter
-------------------------------------
First Second Third Fourth Year
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................ $487.7 $516.3 $569.1 $639.0 $2,212.1
Gross margins............ 213.0 236.7 255.9 291.3 996.9
Earnings from continuing
operations............. 34.7 40.6 48.1 60.7 184.1
Loss from discontinued
operations............. (.8) (.8) (1.1) (1.1) (3.8)
------- ------- ------- ------- ---------
Net earnings............. 33.9 39.8 47.0 59.6 180.3
Preferred stock dividends (.1) (.1) (.1) (.1) (.4)
------- ------- ------- ------- ---------
Available for common
shareholders........... $ 33.8 $ 39.7 $ 46.9 $ 59.5 $ 179.9
======= ======= ======= ======= =========
Earnings per common share:
Continuing operations.. $ .45 $ .52 $ .62 $ .78 $2.37
Discontinued operations. (.01) (.01) (.01) (.02) (.05)
------ ------- ------ ------ ------
Net earnings.............. $ .44 $ .51 $ .61 $ .76 $2.32
====== ======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1994 (Unaudited)
Quarter
-------------------------------------
First Second Third Fourth Year
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................. $444.9 $466.3 $486.7 $542.2 $1,940.1
Gross margins............. 202.4 215.3 229.5 255.6 902.8
Earnings (loss) from
continuing operations... 35.3 36.7 42.9 (7.5) 107.4
Loss from discontinued
operations.............. (.8) (.7) (.6) (1.5) (3.6)
------- ------- ------- ------- ---------
Net earnings (loss)....... 34.5 36.0 42.3 (9.0) 103.8
Preferred stock dividends. (.1) (.1) (.1) (.1) (.4)
------- ------- ------- ------- ---------
Available for common
shareholders............ $ 34.4 $ 35.9 $ 42.2 $ (9.1) $ 103.4
======= ======= ======= ======= =========
Earnings (loss) per common
share:
Continuing operations... $ .45 $ .47 $ .55 $(.10) $1.38
Discontinued operations. (.01) (.01) (.01) (.02) (.05)
------ ------ ------ ------ ------
Net earnings (loss)..... $.44 $.46 $.54 $(.12) $1.33
====== ====== ====== ====== ======
</TABLE>
Fiscal 1994
Earnings from continuing operations included favorable tax adjustments
of $1.4 million, or $.02 per share and $1.6 million, or $.02 per
share, in the first and third quarters, respectively, resulting from
U.S. and foreign tax law changes.
Fourth quarter earnings from continuing operations included after-tax
restructuring charges of $58.8 million, or $.76 per share.
Earnings from continuing operations without restructuring charges and
favorable tax adjustments were:
<TABLE>
<CAPTION>
Quarter
-------------------------------------
First Second Third Fourth Year
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net of taxes.............. $33.9 $36.7 $41.3 $51.3 $163.2
Per share................. $ .43 $ .47 $ .53 $ .66 $ 2.10
</TABLE>
Earnings per share for the four quarters of 1994 are less than full
year per share results by $.01, due to an increase in common shares
outstanding.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning directors of the Registrant, see pages 1
through 4, incorporated herein by reference, of Mallinckrodt's
definitive Proxy Statement for the Annual Meeting of Stockholders to
be held on October 18, 1995. For information concerning executive
officers of the Registrant, see Part I of this report and page 10,
incorporated herein by reference, of Mallinckrodt's definitive Proxy
Statement for the Annual Meeting of the Stockholders to be held on
October 18, 1995.
ITEM 11. EXECUTIVE COMPENSATION
For information concerning executive compensation, see pages 6 through
19, incorporated herein by reference, of Mallinckrodt's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on
October 18, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
For information concerning security ownership of certain beneficial
owners and management, see pages 8 and 9, incorporated herein by
reference, of Mallinckrodt's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on October 18, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning certain relationships and related
transactions, see pages 7, 9 and 10, incorporated herein by reference,
of Mallinckrodt's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on October 18, 1995.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) Financial Statements, Financial Statement Schedules and
Exhibits
(1)(2) See index on page 52 for a listing of financial
statements and financial statement schedules filed
with this report.
(3) Exhibits filed with this report.
<TABLE>
<CAPTION>
Incorporated Filed With
Exhibit Herein Electronic
Number Description by Reference to Submission
------- ------------------------------------- ----------------- ----------
<S> <C> <C> <C>
3.1 Restated Certificate of Incorporation Exhibit 3.1 to
dated June 22, 1994. 1994 10-K.
3.2 By-Laws of Mallinckrodt as amended Exhibit 3.3 to
through April 18, 1990. 1990 10-K.
4.1 Form 8-A Registration Statement under Exhibit 4.6 to
Section 12 of the Securities Exchange 1989 10-K.
Act of 1934, dated April 10, 1987
defining the rights of holders of
Mallinckrodt's 4% Cumulative
Preferred Stock and Common Stock.
4.2 Amended and restated common stock Exhibit 4(b) to
purchase rights agreement dated Form 8-K dated
March 10, 1989. March 10, 1989.
4.3 Second amendment to the common stock Exhibit 6 to
purchase rights agreement dated Form 8-K dated
April 17, 1991. April 18, 1991.
4.4 Indenture dated as of March 15, 1985, Exhibit 4.1 to
as amended and restated as of Form S-3
February 15, 1995 between Registration
Mallinckrodt and First Trust of New Statement
York, National Association. No. 33-57821
4.5 Form 8-A Registration Statement under Exhibit 4.5 to
Section 12 of the Securities 1994 10-K.
Exchange Act of 1934, dated May 6,
1994 regarding $100 million 6% Notes
due October 15, 2003, and $100
million 7% Debentures due December
15, 2013.
10.1(a) Contingent Employment Agreement with Exhibit 10.1(c) to
C. Ray Holman dated April 1, 1987.(1) 1991 10-K.
10.1(b) Contingent Employment Agreement with Exhibit 10.1(c) to
Robert G. Moussa dated April 19, 1993 10-K.
1990. (1)
10.1(c) Contingent Employment Agreement with Exhibit 10.1(f) to
Mack G. Nichols dated April 1, 1991 10-K.
1987. (1)
10.1(d) Employment Agreement with Michael A. Exhibit 10.1 to
Rocca dated April 4, 1994. (1) December 31,
1994 Form 10-Q.
10.1(e) Agreement with Michael A. Rocca Exhibit 10.2 to
dated April 5, 1994. (1) December 31,
1994 Form 10-Q.
10.1(f)(i)Gross-Up Agreement with Michael A. Exhibit 10.3 to
Rocca dated May 9, 1994. (1) December 31,
1994 Form 10-Q.
10.1(f)
(ii) Amendment No. 1 to Gross-Up X
Agreement with Michael A. Rocca
dated September 20, 1994. (1)
10.1(g) Agreement with Paul D. Cottone Exhibit 10.4 to
dated October 1, 1994. (1) December 31,
1994 Form 10-Q.
10.1(h) Employment Agreement with Paul D. Exhibit 10.5 to
Cottone dated October 1, 1994. (1) December 31,
1994 Form 10-Q.
10.1(i) Gross-Up Agreement with Paul D. Exhibit 10.6 to
Cottone dated October 1, 1994. (1) December 31,
1994 Form 10-Q.
10.1(j) Consulting Agreement with Herve M. Exhibit 10.7 to
Pinet for the period December 1, December 31,
1994 to November 30, 1995. (1) 1994 Form 10-Q.
10.2 Mallinckrodt Executive Life Exhibit 10.2 to
Insurance Program adopted May 20, 1989 10-K.
1987. (1)
10.3 Restated Mallinckrodt Executive Exhibit 10.3 to
Long-Term Disability Plan 1989 10-K.
effective January 1, 1987. (1)
10.4(a) Supplemental Benefit Plan for Exhibit 10.6(a) to
Participants in the 1989 10-K.
Mallinckrodt Retirement Plan as
amended and restated effective
January 1, 1980. (1)
10.4(b) Amendment No. 1 dated June 20, 1989 Exhibit 10.6(b) to
to Supplemental Benefit Plan for 1989 10-K.
Participants in the Retirement Plan
for Salaried Employees of
Mallinckrodt. (1)
10.4(c) Amendment No. 2 dated April 20, 1990 Exhibit 10.6(c) to
to Supplemental Benefit Plan for 1990 10-K.
Participants in the Mallinckrodt
Retirement Plan. (1)
10.5(a) Mallinckrodt Supplemental Executive Exhibit 10.7(a)
Retirement Plan restated effective 1989 10-K.
April 19, 1988. (1)
10.5(b) Amendment No. 1 effective December 6, Exhibit 10.7(c) to
1989, to Supplemental Executive 1990 10-K.
Retirement Plan. (1)
10.6(a)(i)Gross-Up Agreement with C. Ray Holman Exhibit 10.7a(a) to
dated July 1, 1992 and Amendment 1993 10-K.
dated April 30, 1993. (1)
10.6(a)
(ii) Amendment No. 2 to Gross-Up Agreement Exhibit 10.7(a)(ii)
with C. Ray Holman dated September 1, to 1994 10-K.
1993. (1)
10.6(a)
(iii) Amendment No. 3 to Gross-Up Agreement X
with C. Ray Holman dated September 20,
1994. (1)
10.6(b)(i)Gross-Up Agreement with Robert G. Exhibit 10.7(c) to
Moussa dated April 22, 1993. (1) 1993 10-K.
10.6(b)
(ii) Amendment No. 2 to Gross-Up Agreement Exhibit 10.7(c)(ii)
with Robert G. Moussa dated to 1994 10-K.
September 1, 1993. (1)
10.6(b)
(iii) Amendment No. 3 to Gross-Up Agreement X
with Robert G. Moussa dated
September 20, 1994. (1)
10.6(c)
(i) Gross-Up Agreement with Mack G. Exhibit 10.7(d)
Nichols dated July 1, 1992. (1) to 1993 10-K.
10.6(c)
(ii) Amendment No. 2 to Gross-Up Agreement Exhibit 10.7(d)(ii)
with Mack G. Nichols dated to 1994 10-K.
September 1, 1993. (1)
10.6(c)
(iii) Amendment No. 3 to Gross-Up Agreement X
with Mack G. Nichols dated
September 20, 1994. (1)
10.7 Mallinckrodt Management Incentive Exhibit 10.9(b) to
Compensation Program as amended and 1991 10-K.
restated effective July 1, 1991. (1)
10.8(a) Mallinckrodt 1973 Stock Option and Post-Effective
Award Plan as amended effective Amendment No. 1 to
February 21, 1990. (1) Form S-8
Registration
Statement
No. 33-32109.
10.8(b) Amendment No. 1 to the Mallinckrodt Form S-8
1973 Stock Option and Award Plan Registration
dated June 19, 1991. (1) Statement
No. 33-43925.
10.9 Mallinckrodt Directors Retirement Exhibit 10.10
Services Plan as amended and restated 1993 10-K.
effective April 21, 1993. (1)
10.10(a) Mallinckrodt 1981 Stock Option Plan Post-Effective
as amended through April 19, 1988. (1) Amendment
No. 3 to
Form S-8
Registratin
Statement
No. 2-80553.
10.10(b) Amendment to the 1981 Stock Option Exhibit 10.12(b)
Plan effective February 15, 1989. (1) to 1989 10-K.
10.10(c) Amendment to the 1981 Stock Option Exhibit 10.12(c) to
Plan effective June 19, 1991. (1) 1991 10-K.
10.11(a) Intercorporate Agreement dated as of Exhibit 10.1 to
July 1, 1987 by and between IMC Fertilizer
Mallinckrodt and IMC Fertilizer Group, Inc.'s
Group, Inc. with Exhibits, including Form S-1
the Restated Certificate of Registration
Incorporation of IMC Fertilizer Statement
Group, Inc., as amended; By-Laws of No. 33-17091
IMC Fertilizer Group, Inc.;
Preliminary Agreement for K-2
Advances; Registration Rights
Agreement; Services Agreement;
Management Services Agreement;
Agreement regarding Pollution
Control and Industrial Revenue Bonds;
License Agreement; office lease and
sublease; management agreements;
supply agreements; and transportation
service agreements.
10.12(a) Note Agreement with The Prudential Exhibit 10.13(a)
Insurance Company of America dated to 1992 10-K.
as of February 1, 1980.
10.12(b) Agreement dated June 3, 1981, Exhibit 10.14(b)
consolidating obligation in Loan to 1990 10-K.
Agreement dated April 18, 1973,
under Note Agreement dated as of
February 1, 1980.
10.12(c) Amendment dated June 15, 1989, to Exhibit 10.14(d)
Note Agreement with Prudential to 1989 10-K.
Insurance Company of America dated
as of February 1, 1980.
10.12(d) Amendment dated April 18, 1991 to Exhibit 10.14(e) to
Note Agreement with Prudential 1991 10-K.
Insurance Company of America dated
as of February 1, 1980 as amended.
10.12(e) Amendment dated June 2, 1992 to Note Exhibit 10.13(c) to
Agreement with Prudential Insurance 1992 10-K.
Company of America dated as of
February 1, 1980 as amended.
10.12(f) Amendment dated July 20, 1993 to Note Exhibit 10.13(f) to
Agreement with Prudential Insurance 1993 10-K.
Company of America dated as of
February 1, 1980 as amended.
10.13 Management Compensation and Benefit Exhibit 10.30 to
Assurance Program. (1) 1988 10-K.
10.14 Form of Trust Agreement dated June 7, Exhibit 10.31 to
1988, between Mallinckrodt and 1988 10-K.
Wachovia Bank & Trust of North
Carolina, N.A., incident to the
program in Exhibit 10.14, for
Mallinckrodt's 1973 Stock Option
and Award Plan, 1981 Stock Option
Plan, Long-Term Performance Incentive
Plan, Supplemental Executive
Retirement Plan, Contingent Employment
Agreements, Gross-Up of Excise Tax
Agreement, and Management Incentive
Compensation Plan. (1)
10.15(a) Corporate Staff Employee Severance Exhibit 10.33 to
and Benefit Assurance Policy. (1) 1988 10-K.
10.15(b) Form of letter sent to participants Exhibit 10.18(b)
in Mallinckrodt's Corporate Staff to 1989 10-K.
Employee Severance and Benefit
Assurance Program. (1)
10.16 Supplemental Life Plan of Exhibit 10.20 to
Mallinckrodt, Inc. effective 1989 10-K.
July 15, 1984. (1)
10.17 Mallinckrodt Directors' Stock Option Exhibit 4(a) to
Plan effective October 17, 1990. (1) Form S-8
Registration
Statement
No. 33-40246.
10.18(a) Consulting Agreement with Ronald G. Exhibit 10.27 to
Evens, M.D., for the period from Amendment
January 1, 1987, through December 31, No. 1 to 1992
1989; extended for the calendar 10-K.
years 1990, 1991 and 1992. (1)
10.18(b) Amendment dated December 17, 1992 Exhibit 10.26(b)
to Consulting Agreement with Ronald to 1993 10-K.
G. Evens, M.D., described in Exhibit
10.25(a). (1)
10.18(c) Amendment dated January 7, 1994 to Exhibit 10.9 to
Consulting Agreement with Ronald G. December 31,
Evens, M.D., extending Agreement 1994 Form 10-Q.
through December 31, 1994.(1)
10.18(d) Amendment dated February 1, 1995 to Exhibit 10.10 to
Consulting Agreement with Ronald G. December 31,
Evens, M.D., extending Agreement 1994 Form 10-Q.
through December 31, 1995. (1)
10.19 Credit Agreement dated March 16, Exhibit 10.1 to
1995 between Coopers Animal Health March 31, 1995
Inc. with Mallinckrodt as Guarantor Form 10-Q.
and Morgan Guaranty Trust Company of
New York, as Agent ($100 million
facility).
10.20 Credit Agreement dated November 30, Exhibit 10.8 to
1994 between Mallinckrodt and Morgan December 31,
Guaranty Trust Company of New York, 1994 Form 10-Q.
as Administrative Agent and Co-Agent
and The Chase Manhattan Bank, N.A.,
as Co-Agent ($550 million facility).
10.21 Offering Memorandum by J.P. Morgan Exhibit 10.29 to
for sale of the commercial paper (CP) 1993 10-K.
notes of Mallinckrodt. The CP
program is backed by credit agreement
included at 10.20.
10.22(a) Deferral Election Plan for Non- Exhibit 10.29 to
Employee Directors, effective 1994 10-K.
June 30, 1994. (1)
10.22(b) Amendment of Deferral Election Plan X
for Non-Employee Directors, effective
February 15, 1995. (1)
10.23 Long-Term Incentive Compensation Exhibit 10.30 to
Plan, effective July 1, 1994. (1) 1994 10-K.
11.1 Primary earnings per share X
computation for the three years ended
June 30, 1995.
11.2 Fully diluted earnings per share X
computation for the three years ended
June 30, 1995.
21 Subsidiaries of the Registrant. X
23.1 Consent of Ernst & Young LLP. X
27 Financial data schedule for the year X
ended June 30, 1995.
</TABLE>
___________
(1) Management contract or compensatory plan required to be filed
pursuant to Item 601 of Regulation S-K.
(b) Reports on Form 8-K
During the quarter and through the date of this report, the following
reports on Form 8-K were filed.
- Report dated September 8, 1995, under Item 5 regarding
Management's Discussion and Analysis and financial information
for the year ended June 30, 1995.
- Report dated September 14, 1995, under Item 5 regarding
repurchase of Company stock.
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
------
Consolidated Balance Sheet at June 30, 1995 and 1994.....28
For the years ended June 30, 1995, 1994 and 1993:
Information by Business Segment........................26
Consolidated Statement of Operations...................27
Consolidated Statement of Cash Flows...................29
Consolidated Statement of Changes in Shareholders'
Equity...............................................30
Notes to Consolidated Financial Statements...............31-44
Quarterly Results (Unaudited)............................45
___________
All other schedules are omitted as the required information is not
present in sufficient amounts or the required information is included
in the consolidated financial statements or notes thereto.
Financial statements and schedules and summarized financial
information of 50 percent or less owned entities are omitted, as none
of such entities are individually or in the aggregate significant
under the tests specified in Regulation S-X under Article 3-09, of
General Instructions as to Financial Statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Mallinckrodt Group Inc.
-----------------------
(Registrant)
By: MICHAEL A. ROCCA By: WILLIAM B. STONE
------------------------- -----------------------------
Michael A. Rocca William B. Stone
Senior Vice President and Vice President and Controller
Chief Financial Officer
Date: September 22, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
C. RAY HOLMAN President, Chief Executive September 22, 1995
------------------- Officer and Director
C. Ray Holman
MICHAEL A. ROCCA Senior Vice President and September 22, 1995
------------------- Chief Financial Officer
Michael A. Rocca
WILLIAM B. STONE Vice President and September 22, 1995
------------------- Controller (Chief
William B. Stone Accounting Officer)
RAYMOND F. BENTELE Director September 22, 1995
-------------------
Raymond F. Bentele
WILLIAM L. DAVIS Director September 22, 1995
-------------------
William L. Davis
RONALD G. EVENS Director September 22, 1995
-------------------
Ronald G. Evens
ALEC FLAMM Director September 22, 1995
-------------------
Alec Flamm
ROBERTA S. KARMEL Director September 22, 1995
-------------------
Roberta S. Karmel
CLAUDINE B. MALONE Director September 22, 1995
-------------------
Claudine B. Malone
MORTON MOSKIN Director September 22, 1995
-------------------
Morton Moskin
HERVE M. PINET Director September 22, 1995
-------------------
Herve M. Pinet
BRIAN M. RUSHTON Director September 22, 1995
-------------------
Brian M. Rushton
DANIEL R. TOLL Director September 22, 1995
-------------------
Daniel R. Toll
ANTHONY VISCUSI Director September 22, 1995
-------------------
Anthony Viscusi
<PAGE>
Exhibit 10.1(f)(ii)
September 20, 1994
MICHAEL A. ROCCA
Dear Mike:
This letter serves to amend your Gross-Up Agreement with Mallinckrodt
Group Inc. dated May 9, 1994. The amendment is necessary due to the
recent increase in your compensation and executive benefits.
Effective upon your acceptance of this amendment, the last sentence of
the opening paragraph of your Gross-Up Agreement is amended as
follows:
"Notwithstanding the foregoing, your Gross-Up Payment,
if any, may not exceed $1,318,955."
Except as modified hereby, all other terms and provisions of your
Gross-Up Agreement with the Company will remain in full force and
effect.
Please indicate your acceptance of the amendment to your Gross-Up
Agreement dated May 9, 1994, by signing the attached copy of this
letter and returning it to my attention.
Very truly yours,
BEVERLY L. HAYES
-------------------------
Beverly L. Hayes
Vice President
Organization & Human Resources
I have read this letter and
understand and accept its terms.
MICHAEL A. ROCCA
-------------------------
Michael A. Rocca
Dated this 27 day of October, 1994.
<PAGE>
Exhibit 10.6(a)(iii)
September 20, 1994
C. RAY HOLMAN
Dear Ray:
This letter serves to amend your Gross-Up Agreement with Mallinckrodt
Group Inc. dated July 27, 1989, and as subsequently amended by letters
dated April 30, 1993 and September 1, 1993. The amendment is
necessary due to the recent increase in your compensation and
executive benefits.
Effective upon your acceptance of this amendment, the last sentence of
the opening paragraph of your Gross-Up Agreement is amended as
follows:
"Notwithstanding the foregoing, your Gross-Up Payment,
if any, may not exceed $4,165,883."
Except as modified hereby, all other terms and provisions of your
Gross-Up Agreement with the Company will remain in full force and
effect.
Please indicate your acceptance of the amendment to your Gross-Up
Agreement dated July 27, 1989, and as subsequently amended by letters
dated April 30, 1993 and September 1, 1993, by signing the attached
copy of this letter and returning it to my attention.
Very truly yours,
BEVERLY L. HAYES
---------------------------
Beverly L. Hayes
Vice President
Organization & Human Resources
I have read this letter and
understand and accept its terms.
C. RAY HOLMAN
---------------------------
C. Ray Holman
Dated this 28 day of October, 1994.
<PAGE>
Exhibit 10.6(b)(iii)
September 20, 1994
ROBERT G. MOUSSA
Dear Bob:
This letter serves to amend your Gross-Up Agreement with Mallinckrodt
Group Inc. dated April 22, 1993, and as subsequently amended by letter
dated September 1, 1993. The amendment is necessary due to the recent
increase in your compensation and executive benefits.
Effective upon your acceptance of this amendment, the last sentence of
the opening paragraph of your Gross-Up Agreement is amended as
follows:
"Notwithstanding the foregoing, your Gross-Up Payment,
if any, may not exceed $1,882,491."
Except as modified hereby, all other terms and provisions of your
Gross-Up Agreement with the Company will remain in full force and
effect.
Please indicate your acceptance of the amendment to your Gross-Up
Agreement dated April 22, 1993, and as subsequently amended by letter
dated September 1, 1993, by signing the attached copy of this letter
and returning it to my attention.
Very truly yours,
BEVERLY L. HAYES
----------------------------
Beverly L. Hayes
Vice President
Organization & Human Resources
I have read this letter and
understand and accept its terms.
ROBERT G. MOUSSA
----------------------------
Robert G. Moussa
Dated this 27th day of October, 1994.
<PAGE>
Exhibit 10.6(c)(iii)
September 20, 1994
MACK G. NICHOLS
Dear Mack:
This letter serves to amend your Gross-Up Agreement with Mallinckrodt
Group Inc. dated July 1, 1992, and as subsequently amended by letter
dated September 1, 1993. The amendment is necessary due to the recent
increase in your compensation and executive benefits.
Effective upon your acceptance of this amendment, the last sentence of
the opening paragraph of your Gross-Up Agreement is amended as
follows:
"Notwithstanding the foregoing, your Gross-Up Payment,
if any, may not exceed $1,347,498."
Except as modified hereby, all other terms and provisions of your
Gross-Up Agreement with the Company will remain in full force and
effect.
Please indicate your acceptance of the amendment to your Gross-Up
Agreement dated July 1, 1992, and as subsequently amended by letter
dated September 1, 1993, by signing the attached copy of this letter
and returning it to my attention.
Very truly yours,
BEVERLY L. HAYES
--------------------------
Beverly L. Hayes
Vice President
Organization & Human Resources
I have read this letter and
understand and accept its terms.
MACK. G. NICHOLS
--------------------------
Mack G. Nichols
Dated this 27 day of October, 1994.
Exhibit 10.22(b)
<PAGE>
February 15, 1995
MALLINCKRODT GROUP INC.
RESOLUTION
Amendment of Deferral Election Plan for
Non-Employee Directors
----------------------------
RESOLVED, that upon recommendation of the Corporate Governance
Committee, and in conformance with rights reserved to the Board under
Section 3.1 of the Deferral Election Plan for Non-Employee Directors
of the Corporation (the "Plan"), Sections 2.4 and 3.7 of the Plan be
and the same are hereby amended as provided in Attachment A; and
RESOLVED FURTHER, approval by shareholders of the Company on the
amendments is not required as these amendments do not materially
increase the benefits accruing to participants in the Plan.
(attachment)
<PAGE>
ATTACHMENT "A" TO FEBRUARY 15, 1995 RESOLUTION TITLED "AMENDMENT OF
DEFERRAL ELECTION PLAN FOR NON-EMPLOYEE DIRECTORS."
2.4 Dividends; Voting. If the Participant elects not to defer
receipt of dividend equivalents on Stock previously allocated,
dividend equivalents on such Stock will be paid directly to the
Participant as, if and when dividends are paid by the Company. If the
Participant elects to defer receipt of the Stock, the Participant
shall not have the right to vote the Stock purchased for the debit
account of the Participant.
3.7 Unsecured Obligation. Amounts deferred under this Plan
shall be an unsecured obligation of the Company.
<PAGE>
<TABLE>
Exhibit 11.1
<CAPTION>
EARNINGS PER SHARE
PRIMARY COMPUTATION
Years Ended June 30, 1993, 1994 and 1995
($ in millions except share and per share amounts)
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Basis for computation of earnings per
common and common equivalent shares:
Earnings (loss) from continuing
operations $184.1 $107.4 $(113.8)
Deduct dividends on 4 Percent
cumulative preferred stock (.4) (.4) (.4)
------- ------- --------
Earnings (loss) from continuing
operations available for common
shareholders 183.7 107.0 (114.2)
Loss from discontinued operations (3.8) (3.6) (6.0)
Cumulative effect of accounting
changes (80.6)
------- ------- --------
Available for common shareholders $179.9 $103.4 $(200.8)
======= ======= ========
Number of common and common equivalent
shares:
Weighted average shares outstanding 76,687,154 76,809,532 76,269,208
Shares issuable upon exercise of
stock options, net of shares
assumed to be repurchased 770,960 797,884 1,139,460
---------- ---------- ----------
77,458,114 77,607,416 77,408,668
========== ========== ==========
Earnings (loss) per common and common
equivalent share:
Continuing operations $2.37 $1.38 $(1.48)
Discontinued operations (.05) (.05) (.08)
Accounting changes (1.04)
------ ------ -------
Net earnings (loss) $2.32 $1.33 $(2.60)
====== ====== =======
</TABLE>
<PAGE>
<TABLE>
Exhibit 11.2
<CAPTION>
EARNINGS PER SHARE
FULLY DILUTED COMPUTATION
Years Ended June 30, 1993, 1994 and 1995
($ in millions except share and per share amounts)
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Basis for computation of earnings per
common and common equivalent shares:
Earnings (loss) from continuing
operations $184.1 $107.4 $(113.8)
Deduct dividends on 4 Percent
cumulative preferred stock (.4) (.4) (.4)
------- ------- --------
Earnings (loss) from continuing
operations available for common
shareholders 183.7 107.0 (114.2)
Loss from discontinued operations (3.8) (3.6) (6.0)
Cumulative effect of accounting
changes (80.6)
------- ------- --------
Available for common shareholders $179.9 $103.4 $(200.8)
======= ======= ========
Number of common and common equivalent
shares:
Weighted average shares outstanding 76,687,154 76,809,532 76,269,208
Shares issuable upon exercise of
stock options, net of shares
assumed to be repurchased 1,089,504 882,368 1,139,460
---------- ---------- ----------
77,776,658 77,691,900 77,408,668
========== ========== ==========
Earnings (loss) per common and common
equivalent share:
Continuing operations $2.36 $1.38 $(1.48)
Discontinued operations (.05) (.05) (.08)
Accounting changes (1.04)
------ ------ -------
Net earnings (loss) $2.31 $1.33 $(2.60)
====== ====== =======
</TABLE>
EXHIBIT 21
MALLINCKRODT GROUP INC.
1995 LEGAL ENTITY MASTER FILE
(FILE:95LEGAL)
LEGAL NAME JURISDICTION
_____________________________________________________________________
Agribusiness Marketers Inc. DELAWARE
Ark Products Limited UNITED KINGDOM
Beheersmaatschappij Finjneman B.V. (B.V.1) NETHERLANDS
Bouwbedrijf Fijneman Kaarsheuvel B.V.(B.V.2) NETHERLANDS
Carnforth Limited BERMUDA
Commercial Solvents de Mexico S.A. de C.V. MEXICO
Coopers Animal Health Inc. DELAWARE
Coopers Animal Health (Holdings) Limited UNITED KINGDOM
Coopers Animal Health (Ireland) Limited IRELAND
Coopers Uruguay S.A. URUGUAY
Coromandel Fertilisers Ltd. INDIA
Creative Solutions Industria e Comercio Ltda.BRAZIL
DAR S.p.A. ITALY
Dittander Limited IRELAND
Dritte CORSA Verwaltungsgesellshaft mbH GERMANY
Feed New Wales (To be provided)
Fries & Fries Holdings (U.K.) Ltd. UNITED KINGDOM
Fries & Fries, Inc. DELAWARE
HemoCue AB SWEDEN
HemoCue BV HOLLAND
HemoCue, Inc. CALIFORNIA
Horse Health Products, Inc. DELAWARE
Horse Health Products, Inc. 2 DELAWARE
IMC Coal Development Corporation DELAWARE
IMC Exploration Company MARYLAND
IMC Feed Ingredients, Inc. DELAWARE
IMCERA Ltd. UNITED KINGDOM
J.T. Baker B.V. NETHERLANDS
J.T. Baker S.A. de C.V. MEXICO
J.T. Baker, Inc. NEW JERSEY
Laboratoires Mallinckrodt Medical S.A. FRANCE
Mallinckrodt Athlone Holdings, Inc. DELAWARE
Mallinckrodt Chemical Acquisitions, Inc. DELAWARE
Mallinckrodt Chemical Australia Pty. Limited AUSTRALIA
Mallinckrodt Chemical Belgium B.V.B.A. BELGIUM
Mallinckrodt Chemical Canada Inc. CANADA
Mallinckrodt Chemical GmbH GERMANY
Mallinckrodt Chemical Holdings GmbH GERMANY
Mallinckrodt Chemical Holdings (U.K.) Ltd. UNITED KINGDOM
Mallinckrodt Chemical Limited UNITED KINGDOM
Mallinckrodt Chemical, Inc. DELAWARE
Mallinckrodt Feed Ingredients Limited CANADA
Mallinckrodt Group Inc. DELAWARE
Mallinckrodt Group Inc. NEW YORK
Mallinckrodt Holdings (U.K.) Limited UNITED KINGDOM
Mallinckrodt Holdings (U.S.A.) Inc. DELAWARE
Mallinckrodt Iberica S.A. SPAIN
Mallinckrodt International Corporation MISSOURI
Mallinckrodt Medical IRELAND
Mallinckrodt Medical AG SWITZERLAND
Mallinckrodt Medical B.V. HOLLAND
Mallinckrodt Medical Caribe, Inc. DELAWARE
Mallinckrodt Medical Co., Ltd. JAPAN
Mallinckrodt Medical do Brazil BRAZIL
Mallinckrodt Medical GmbH GERMANY
Mallinckrodt Medical Holdings GmbH GERMANY
Mallinckrodt Medical Holdings Ireland IRELAND
Mallinckrodt Medical Holdings (U.K.) Ltd. UNITED KINGDOM
Mallinckrodt Medical Imaging - Ireland IRELAND
Mallinckrodt Medical International Holdings
(Ireland) IRELAND
Mallinckrodt Medical Lda. PORTUGAL
Mallinckrodt Medical PMC NEVADA
Mallinckrodt Medical Pty. Ltd. AUSTRALIA
Mallinckrodt Medical Southeast Asia Pte.Ltd. SINGAPORE
Mallinckrodt Medical S.A. FRANCE
Mallinckrodt Medical S.A. SPAIN
Mallinckrodt Medical S.A. de C.V. MEXICO
Mallinckrodt Medical S.A./N.V. BELGIUM
Mallinckrodt Medical S.p.A. ITALY
Mallinckrodt Medical Vertriebs-GmbH AUSTRIA
Mallinckrodt Medical (U.K.) Limited UNITED KINGDOM
Mallinckrodt Medical, Inc. CANADA
Mallinckrodt Medical, Inc. DELAWARE
Mallinckrodt Radiopharma GmbH GERMANY
Mallinckrodt Sensor Systems, Inc. DELAWARE
Mallinckrodt TMH NEVADA
Mallinckrodt Veterinaire S/A/ FRANCE
Mallinckrodt Veterinaria Limitada PORTUGAL
Mallinckrodt Veterinaria SpA ITALY
Mallinckrodt Veterinaria S.A. SPAIN
Mallinckrodt Veterinary Aps DENMARK
Mallinckrodt Veterinary Asia, Inc. DELAWARE
Mallinckrodt Veterinary BV NETHERLANDS
Mallinckrodt Veterinary Colombia
Holdings,Inc. PANAMA
Mallinckrodt Veterinary GmbH GERMANY
Mallinckrodt Veterinary Holdings Limited UNITED KINGDOM
Mallinckrodt Veterinary International
Colombia Holdings, Inc. PANAMA
Mallinckrodt Veterinary International, Inc. DELAWARE
Mallinckrodt Veterinary Limited AUSTRALIA
Mallinckrodt Veterinary Limited IRELAND
Mallinckrodt Veterinary Limited NEW ZEALAND
Mallinckrodt Veterinary Limited UNITED KINGDOM
Mallinckrodt Veterinary Limited HONG KONG
Mallinckrodt Veterinary Limited THAILAND
Mallinckrodt Veterinary LTDA BRAZIL
Mallinckrodt Veterinary NV BELGIUM
Mallinckrodt Veterinary Operations SDN.BHD. MALAYSIA
Mallinckrodt Veterinary Operations Ltd. IRELAND
Mallinckrodt Veterinary Pensions Limited IRELAND
Mallinckrodt Veterinary Pensions Limited UNITED KINGDOM
Mallinckrodt Veterinary PTE Ltd. SINGAPORE
Mallinckrodt Veterinary SA GREECE
Mallinckrodt Veterinary SDN.BHD. MALAYSIA
Mallinckrodt Veterinary Superannuation
PTY Limited AUSTRALIA
Mallinckrodt Veterinary Superannuation
PTY Limited NEW ZEALAND
Mallinckrodt Veterinary S.A. COLOMBIA
Mallinckrodt Veterinary S.A. ARGENTINA
Mallinckrodt Veterinary S.A. PARAGUAY
Mallinckrodt Veterinary (UK) Limited UNITED KINGDOM
Mallinckrodt Veterinary, Inc. DELAWARE
Mallinckrodt Veterinary, Inc. PHILIPPINES
Mallinckrodt Veterinary, Inc. CANADA
Mallinckrodt Veterinary, Inc. TAIWAN
Mallinckrodt Veterinary, S.A. VENEZUELA
Mallinckrodt Veterinary, S.A. de C.V. MEXICO
Mallinckrodt, Inc. DELAWARE
Medexel, S.A. FRANCE
MMHC, Inc. DELAWARE
MMI, Inc. DELAWARE
MMJ S.A. de C.V.
MSCH Company DELAWARE
National Catheter Corporation NEW YORK
Paracet Laboratories, Inc. DELAWARE
Pitman-Moore Animal Health Limited UNITED KINGDOM
Pitman-Moore Animal Health Limited NEW ZEALAND
Pitman-Moore Argentina S.A. ARGENTINA
Pitman-Moore Australia Holdings Pty.
Limited UNITED STATES
PM Inc. (To be provided)
RadPharm, Inc. CALIFORNIA
Sterwin Laboratories, Inc. DELAWARE
Synbiotics Corporation CALIFORNIA
Tasman Vaccine Laboratory (U.K.) Limited UNITED KINGDOM
Tastemaker DELAWARE
Tastemaker Holdings Ltd. UNITED KINGDOM
Tastemaker Limited UNITED KINGDOM
Tastemaker, Inc. CANADA
Tastemaker, S.A. MEXICO
TRIMET Holdings, Inc. DELAWARE
TRIMET Technical Products, Inc. DELAWARE
Wellcome Argentina Limited UNITED KINGDOM
WICIT Limited UNITED KINGDOM
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following
registration statements and related prospectuses filed by Mallinckrodt
Group Inc. under the Securities Act of 1933 of our report dated August
8, 1995 with respect to the consolidated financial statements of
Mallinckrodt Group Inc. included in this Annual Report on Form 10-K
for the year ended June 30, 1995:
Commission File No.
-------------------
Form S-8, No. 2-65727
Form S-8, No. 2-72455
Form S-8, No. 2-70868
Form S-8, No. 2-90910
Form S-8, No. 2-94151
Form S-8, No. 33-10381
Form S-8, No. 33-32109
Form S-8, No. 33-40246
Form S-8, No. 33-43925
Form S-3, No. 2-96566
Form S-3, No. 33-39637
Form S-3, No. 33-47081
Form S-3, No. 33-57821
St. Louis, Missouri
September 19, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND INCOME STATEMENT, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL SCHEDULES.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 62
<SECURITIES> 0
<RECEIVABLES> 428
<ALLOWANCES> 13
<INVENTORY> 434
<CURRENT-ASSETS> 1,020
<PP&E> 1,541
<DEPRECIATION> 535
<TOTAL-ASSETS> 2,721
<CURRENT-LIABILITIES> 748
<BONDS> 501
<COMMON> 87
0
11
<OTHER-SE> 1,073
<TOTAL-LIABILITY-AND-EQUITY> 2,721
<SALES> 2,212
<TOTAL-REVENUES> 2,212
<CGS> 1,215
<TOTAL-COSTS> 1,883
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 295
<INCOME-TAX> 110
<INCOME-CONTINUING> 184
<DISCONTINUED> (4)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 180
<EPS-PRIMARY> 2.32
<EPS-DILUTED> 2.31
</TABLE>
